Baroness Walmsley: My Lords, does the Minister agree that the key word in the Question of the noble Lord, Lord Ahmed, was "poorest"? That is the common factor in low educational attainment, rather than ethnicity. Chinese, Indian, Irish and mixed white and Asian heritage children achieve results higher than the national average. Will the Government therefore redouble their efforts to reach their target of eliminating child poverty?

Lord Adonis: My Lords, we will certainly continue our efforts in that regard. I should point out that the population of children who are eligible for free school meals breaks down differently between ethnic groups. Those children from the Pakistani and Bangladeshi community who are eligible for free school meals now perform significantly better than those from the white working-class community. In the schools that have the highest concentrations of pupils entitled to free school meals, there is a wide variation of performance. Our challenge as a country is to see that we raise all schools to the highest level of performance, accepting that those that have poor intakes face bigger challenges.

The Earl of Sandwich: My Lords, does the noble Baroness agree that an important factor is the awareness of the Sudanese people themselves of human rights abuse? Since there is a number of respected NGOs and legal aid agencies in Sudan, are the Government giving them encouragement?

Lord Astor of Hever: My Lords, I thank the noble and learned Lord the Attorney-General for coming to the House with this important Statement. We on these Benches are relieved to know that these soldiers will not be facing charges. But we must not forget that a British soldier died in tragic circumstances, and our thoughts and deep sympathy go out to his wife and family. While Sergeant Roberts might not have survived if he had been wearing body armour, his death highlights the lamentable betrayal of our Armed Forces in failing to provide them with sufficient quantities of essential equipment. We should also bear in mind that an Iraqi died in this incident. He, too, had family, and our sympathy goes to them.
	This whole sorry saga has resulted in damaging consequences for the Armed Forces and their morale and has had constitutional ramifications. However, this is not the time for further debate about the basis for the Attorney-General's powers. We will return to this issue when the Armed Forces Bill reaches this House.
	No one in the House excuses criminal acts. Soldiers guilty of misconduct under arms must not be immune from justice. But if justice is to be done, it must be administered to the highest standard and without delay. It is disgraceful that the soldiers of the Royal Tank Regiment have waited more than three years to have their names cleared. These soldiers have been badly let down by authorities responsible for conducting these investigations, both military and civil. For 18 months this case sat with the military jurisdiction. For 18 months it sat with the Crown Prosecution Service. What on earth was happening during this time? What assessment was made of the probability of gathering any reliable evidence from a war zone and the quality of some of that evidence being affected by the passage of time? Will the noble and learned Lord indicate why the CPS, for which he is statutorily responsible, took such a long time to reach the same conclusions as were originally advanced by the chain of command, namely that the soldiers were acting in genuine self-defence?
	The noble and learned Lord has had the opportunity to examine all the papers in each of the military and civilian stages and has therefore always been in a position to know and to assess how this cumulative disaster has built up. Will he therefore tell the House if he regards any one of these contributory delays as being avoidable? If he does regard any of them as being unacceptable, what action will he take? In debates in this House, and in correspondence with several noble Lords, the noble and learned Lord has placed great reliance on his powers of superintendence. Will he use those powers to reduce these unacceptable delays?
	In correspondence with the former Secretary of State for Defence, the noble and learned Lord expressed concern at the quality of military investigations into a number of incidents. Clearly neither the service police nor the prosecuting authorities were sufficiently funded to perform the duties they were expected to undertake. The noble and learned Lord raised his concerns as long ago as 2004. Given the superintendence powers, can the noble and learned Lord reassure the House that the Royal Military Police are now fully competent to handle investigations in an operational theatre and really are properly funded? If this is the case, does he agree that this will negate the need to transfer any further cases to the civilian jurisdiction?
	Finally, the Attorney-General indicated that one of his reasons for transferring the investigation out of the military jurisdiction was due to the alleged interference from the chain of command. I am therefore delighted that the Statement makes it clear that the chain of command acted lawfully and the integrity of the officers involved is not in doubt.

Lord Thomas of Gresford: My Lords, I declare an interest as having represented paratroopers in a case last October and being currently engaged in another court martial. I also express on behalf of these Benches our relief that the ordeal that the soldiers have undergone over a very lengthy period has now come to an end. However, uppermost in our minds is sympathy for Mrs Samantha Roberts and the family of the deceased sergeant for their loss.
	The Statement revealed some shocking failures on the part of the SIB to carry out absolutely basic things. For example, by August, months after the event, the soldiers had not been interviewed under caution; witness statements had not been taken; there was no ballistics investigation to find out which soldiers had fired the shots; and there had been no post-mortem on the body of Mr Zaher. Unfortunately, this reflects evidence which has been given in the cases to which I have referred.
	Your Lordships will recall that Mrs Roberts released tapes following the death of her husband which indicated that her husband complained of shortages of equipment. He described the shortages as "disgraceful" and said that the supplies to soldiers were a joke. There were many accounts at that time from soldiers serving in the field in Iraq of their having to buy equipment themselves.
	The Ministry of Defence's report into this matter found that Sergeant Roberts would have survived if he had had the tough ceramic plates which he should have had in his flak jacket. It is surprising to discover that that flak jacket has been destroyed. The reason given by the Ministry of Defence is the potentially hazardous nature of bloodstains. In every murder case, there is always some clothing which is bloodstained and it is handled normally. It is not necessary to destroy important evidence, but the flak jacket of Sergeant Roberts which should have contained those ceramic plates was destroyed. Sergeant Roberts had been ordered to hand over the ceramic plates to another soldier because his regiment did not have enough of them; they had not been supplied with them.
	The Ministry of Defence has admitted liability for negligence in a case brought by the family. If an employee of a company were ordered to hand over protective equipment to another person and the employee were then killed or seriously injured, undoubtedly that company would be prosecuted by the Health and Safety Executive. No political responsibility for these equipment failures in Iraq has been accepted. Mrs Roberts called on Mr Hoon—who apologised personally to her—to resign, but of course he did not do so.
	The CPS guidelines on involuntary manslaughter by gross negligence require the CPS, when considering an offence of that nature, to apply four tests. Did the defendant—in that instance, it is the controlling mind of the organisation—owe a duty of care towards the victim who has died? Did the Ministry of Defence owe a duty of care towards Sergeant Roberts? The answer must unequivocally be "yes". If so, has the defendant breached that duty of care? It has admitted liability. Has such breach caused the victim's death? The guidelines state that the law of negligence must be applied to ascertain whether there has been a breach of that duty. It is admitted. The final test is: if so, was that breach of duty so bad as to amount when viewed objectively to gross negligence warranting a criminal conviction?
	Now that the soldiers have been properly relieved of responsibility for this, what about the Ministry of Defence and its equipment failures? Has any consideration been given to applying the guidelines of the CPS to those failures? If political responsibility cannot be taken by Mr Hoon by his resigning—and that is a feature of this Government—what about the criminal responsibility of those who sent our troops into a dangerous field of war with inadequate equipment?

Lord Goldsmith: My Lords, I am grateful to the noble Lord, Lord Astor, for his welcome for this Statement. I thought that it was right to come to the House to explain, and to explain as fully as I have sought to do, the circumstances, because of the interest that they have already garnered. I welcome the sympathy that he has expressed, which of course I share, particularly to Mrs Roberts.
	The noble Lords, Lord Astor and Lord Thomas—who also expressed sympathy—both referred to the circumstances of the protective equipment issued. It is, of course, a fact that Sergeant Roberts was not wearing an inserted Kevlar plate, or plates, at the time of the incident. That, of course, is a matter for the Ministry of Defence, as both noble Lords would accept. The noble Lord, Lord Thomas, referred to the legal action that is already taking place. I do not therefore propose to say anything more about that aspect, save to respond to the noble Lord's question. As I understood it, he raised the question of the potential criminal responsibility of the Ministry of Defence. The Ministry of Defence is not, of course, a corporate body in any event and, because of Crown immunity, it would not in any event be subject to the sort of offence that he raises. That is a preliminary issue before one ever gets into further consideration—and I am not going to do that on my feet, or respond on the particular issues that he raised. He is absolutely right to say that what has been considered has been the potential criminal responsibility of the soldiers involved, and that has been dealt with.
	Questions have been raised about the time taken to reach this conclusion. As I made clear in the Statement, I personally very much regret that. There are a number of reasons why that is so, including the fact that because of differences of view—let me put it no higher than that—a full investigation by the SIB, including the sort of elements that the noble Lord, Lord Thomas, refers to, did not initially take place. As I said in my Statement, it would have been much better had it done so, although I do not regard the chain of command as having acted unlawfully in having taken the view that it did. I believe that in this sort of incident, because two people died in obviously difficult circumstances, it would have been right to have a full investigation, so that proper conclusions could be reached.
	I have also been asked what steps are being taken to deal with two matters. First, in relation to the ability of the SIB of the Royal Military Police to deal with complicated investigations of this kind, I refer the House to what I said in my Statement. The noble Lord, Lord Astor, asked me whether, as superintending Minister, I could give an assurance to the House about the quality of the investigators. I am not responsible for the investigators—neither the military nor the civilian investigators. That remains, in the case of the military investigators, a matter for the Ministry of Defence. My superintending authority extends only to the prosecuting authority, but I am assured by my colleagues, with whom I have discussed this matter, as I said in my Statement, that additional resources have been provided. Moreover, Her Majesty's Inspectorate of Constabulary has begun a thematic inspection of the SIB, which will report later this year. I personally very much welcome that, as it will enable an objective professional evaluation to be made of what the position is.
	As for delay more generally, I indicated in my Statement a number of steps that are in progress, which I believe will reduce delay. In this particular instance, the initial decision not to allow a full investigation, the delay in then getting that resolved, and the difficulties that the Metropolitan Police had in conducting their inquiries, have all contributed to a delay which, overall, I do not ever want to see again in a case such as this one. We must work hard to ensure that that is so.
	I hope that that covers essentially the questions raised by both noble Lords. I thank them otherwise for the comments that they have made.

Lord Garden: My Lords, I share with all who have spoken so far the horror at the delays that have been caused. We have heard a detailed explanation of those delays from the noble and learned Lord the Attorney-General. There is a very adverse effect on the families of the soldiers, the soldiers themselves, the families of both of those killed and indeed on general Army morale when these things go on for so long. I therefore welcome the assurances which the noble and learned Lord has given us that the Ministry of Defence is putting in new resources. However, he is slightly vague on what those changes are. I am pleased to see that the noble Lord, Lord Drayson, is in his place, because I assume that in order to put together these new extra requirements there was a joint study of some sort between the two departments. I think it would be useful if your Lordships could see in the Library of the House a copy of that review along with the assurances that the noble and learned Lord the Attorney-General has had from the Ministry of Defence.
	I draw attention to the issue of how the Royal Military Police are to relate to Her Majesty's Inspectorate of Constabulary. This is a familiar refrain, in that we talked about it last week in the context of the Blake review into the Deepcut inquiry. Recommendation 24 of that review suggested that the RMP should be formally brought under the HMIC. Does the noble and learned Lord the Attorney-General believe that that should be done and done forthwith? Could he also explain what a "thematic" inspection is? It is not a term that I understand.
	I would like a slightly more detailed assurance from the noble and learned Lord. I realise he cannot spell it out today, but in some way we need to know what the Ministry of Defence has told him it is going to do, so that we may be assured that it does it.

Lord Goldsmith: My Lords, my colleagues, including the noble Lord, Lord Drayson, who sits beside my noble friend, will note carefully what the noble Lord has said. There was not a joint study between the two departments, so there is not one to put in the Library. However, I very much welcome the fact that Her Majesty's Inspectorate of Constabulary has begun its thematic review. I understand that term to mean a review particularly looking into the ability of the SIB to deal with all the sorts of cases that are put to it, as opposed to a more general inspection of the Royal Military Police as a whole. It may be that at a later stage my colleagues will be in a position to give more detail about the terms of reference of that, which will help.
	As for the future, I am sure the noble Lord makes an important point about future inspection. The arrangements for criminal justice inspection will be changing as a result of the Government's decision, but in the civilian field the existing inspectorates will be brought together as part of a single criminal justice inspectorate. That provides an opportunity also to consider, at least from my department's point of view, what form of inspection should take place with regard to the prosecutors. I suspect that the Armed Forces Bill will provide an opportunity for consideration of that as well.

Lord Goldsmith: My Lords, I will not comment on the last point; I note what the noble Baroness said. The position on the rules of engagement and international law—whether applied directly as a result of the convention or as a result of its application through customary law—is that in a warlike situation it is open to use any degree of force against combatants. In relation to those who are wearing uniform, that is a straightforward issue to determine. In relation to those who are not in uniform, difficult questions can arise as to whether they are irregular combatants, whether they are civilians who are at that point taking part in hostilities, or whether they are there in a different position. Once they stop taking part in hostilities, they are subject to the rules that apply to civilians.
	It was clear that the soldiers in this case were entitled to use force in defence of Sergeant Roberts, but that would be subject to the requirement that it should be necessary and reasonable; or at least that they should honestly have believed it to be reasonable. Given that the prosecution has reached a conclusion on the evidence that it would not be possible to prove that they did not believe that honestly, the question of—and there were two views about this—whether on this occasion Mr Zaher was acting as a combatant or had stepped outside his civilian role does not need to be determined.

Earl Attlee: My Lords, I remind the House that I have an interest as a serving TA officer. Is the noble and learned Lord aware that I still have absolutely no confidence whatever that I would be promptly or fairly dealt with if I were on an operation and I had to engage the enemy? How many servicemen were being considered for prosecution? What numbers were involved? Op TELIC was of questionable legality and necessity; I do not expect the noble and learned Lord to respond on that point.
	I do not believe that the Secretary of State has any direct responsibly for the lack of body armour. If Sergeant Roberts's pistol had not failed, we would not be here this afternoon. When did the autopsy on Mr Zaher take place? Most importantly, does the noble and learned Lord believe that Mr Zaher was of sound mind? It does not sound as though he was. If it took nearly 12 months for the chain of command and Army Legal Services to determine whether Mr Zaher was a combatant or a civilian, why do the members of the Armed Forces get only as many seconds to make that determination? Is it correct that the Strategic Defence Review cut a Royal Military Police TA unit that was full of experienced Metropolitan Police officers who were well used to investigating very serious criminal offences?

Lord Goldsmith: My Lords, I am aware of the noble Earl's views on whether he would have confidence because he has expressed them on other occasions. I completely disagree with him, as he knows. We discussed this at some length during a previous debate on this subject. If anything, this demonstrates that there needs to be, and there will be, as the noble Lord, Lord Astor, said, a fair and independent investigation that will reach a conclusion. British soldiers and British service men and women should and can expect, and will receive, a just consideration of their cases by those who have responsibility. They can rely on that. I will comment on the noble Earl's remark about questionable legality. As he would anticipate, I absolutely disagree with him on that, but this is not the occasion for further debate on that subject.
	The autopsy on Mr Zaher took place during the investigations by the Metropolitan Police at least two years after the event, although I do not have the precise date in front of me. That meant that the autopsy could not be as it would have been had it taken place immediately afterwards, for reasons that I could go into if necessary. I have absolutely no view, nor could I have any view, about Mr Zaher's mental state. A road block was taking place; I cannot say what his motives were, and it is not necessary for the purpose of my Statement.
	I disagree with the way that the noble Earl put his question about determination of the status of Mr Zaher. It was not so much that it took the SIB and the chain of command a year to determine his status, but that there was a debate about whether a full investigation was needed. That took quite a time to determine. I am sure that there should have been a full investigation, because that is the way we can have confidence that things have been properly investigated and looked at. I have made other comments in relation to that.
	Regarding the soldier, he has every right to use reasonable force in self-defence, whoever is the perceived attacker, civilian or not. That is not the issue. But the Geneva Convention provides that guidance, as, indeed, do the rules of engagement. If it is not clear that someone is a combatant, they should be treated as a civilian—use force in self-defence, but go no further than that.

Lord Patten of Barnes: rose to call attention to the role of British and other European universities in the promotion of research and development; and to move for Papers.
	My Lords, I should confess at the outset of this very welcome debate—I am glad that so many noble Lords are taking part in it—that I open it as a sort of serial Chancellor. Previously I was a European Commissioner and attended the European Council meeting in Lisbon six years ago, which produced the eponymous strategy for turning Europe into the most dynamic and competitive economy in the world by 2010. I hope that no noble Lord is holding his or her breath.
	It would be wrong to argue that nothing has been achieved and charitable, perhaps, to note that achievements have been attenuated and patchy. In some areas that is wholly understandable; countries, individual and elected governments have difficulties with labour market issues, questions of energy liberalisation and so on. However, I find it inexplicable that we have made such little progress in investment in research and development and in higher education. It is extremely important to see the two together and not to discuss them as though they were different planets because universities remain the most important incubators of research in our society.
	We often talk about living in a knowledge-based economy—a curious cliché because I cannot, off-hand, recall any ignorance-based economies—and there is obviously some truth in it. On day one of O-level economics we all learnt that the principal determinants of productivity and economic growth were land, labour and capital. We know today that principal determinants of productivity are knowledge and information. We also know that, increasingly, we face competition not from low-skill, low-cost economies, but from high-skill, low-cost economies. A few weeks ago I spent an extremely educational day on the Infosys campus in Bangalore, seeing 14,000 young Indian software engineers, who are much more of a threat to our competitiveness than Polish plumbers.
	The great distinguished educational economist of higher education Alison Wolf, probably one of the very few economists to argue with passion the liberal case for investment in universities and higher education, also argues perfectly reasonably that there is no mechanistic relationship between the amount spent on universities, the amount invested in university R&D, the amount invested in the expansion of universities and the subsequent economic growth. That is true. It is equally true that in the corporate world there is not always a direct relationship between investment in R&D and innovation. Wal-Mart and Tesco are clearly not great investors in R&D but are considerable innovators. But among the higher-value-added, higher-tech companies, such as Nokia and GlaxoSmithKline, the position is completely different. It is also salutary to look at the share portfolios of research-intensive industries to see how they outperform companies in which less research is undertaken.
	What is true of the corporate world is also, by and large, true of countries. Whether you look at the United States or Korea, it has been the story of the past few years. Our problem in Europe is largely the aggregate of problems in individual countries, and the principal issue is that we simply do not spend enough on our universities. That was true under the government of whom I was a small and insignificant part, just as it is true today. In this country, we funded the welcome and substantial expansion of higher education by reducing our investment in every student. The Treasury calls that "higher productivity in universities". What that means is depressed salaries, degraded facilities—libraries and laboratories—and, in many cases, a debased learning experience, with the acquisition of a university degree seen all too often as a rite of passage and the acquisition of a credit to get a job.
	The best way of looking at the problem is to turn up the latest OECD statistics for investment in higher education in developed countries. What do you see? In this country, we spend 1.1 per cent of GDP on higher education. The same figure applies in France and Germany and it is the European Union average. The United States spends 2.6 per cent of GDP. We sometimes kid ourselves that that is entirely because of the huge endowments that American universities have and because they charge tuition fees. It is interesting to note the amount that the taxpayer in the United States invests in higher education. Taxpayers in America spend more on higher education as a proportion of GDP than those in France and Germany and considerably more than taxpayers in this country. So while of course the size of endowments matters, and only two European universities—guess which ones—would get into the top 150 in the United States in terms of private endowment, but one should not overlook the fact that the American taxpayer is also doing more than we are.
	The OECD has produced an extremely good little booklet on the educational aspects of the Lisbon strategy. I commend it to noble Lords. It includes the following sentence, which I am afraid goes right to the heart of the problem that we face in the European Union and the United Kingdom. The OECD points out that most European countries,
	"are holding back their universities by neither making the required public investment nor allowing universities to charge tuition fees".
	You have to do one or the other—preferably both—because the alternative is that our universities will continue to fall further behind those in the United States, and we will find ourselves overtaken by the increasingly prestigious institutes of technology in India and the elite universities in which the Chinese are now investing so much money.
	There are two comparators worth looking at to see how much we must do, and how serious the problem is in Europe and this country. First, two international league tables are often referred to, both of whose methodologies are questioned—one, the Shanghai Jaio Tong, with more reason than the other, the Times Higher Education Supplement. Looking at the attempts at producing an objective assessment of what universities are doing, taking into account, among other things, research impact, the Shanghai list has two European universities in the world's top 10, and nine in the top 50—none German. The Times Higher Education Supplement has three European universities in the top 10—one French—and 11 EU universities in the top 50. That is slightly better. The first German university in the list is Heidelberg, at number 45.
	I mention German universities because the great American research universities were based on the German Humboldt model. It is a weakness for Europe that German universities have fallen back in these league tables. They demonstrate that we probably have much the best university system in the EU, and probably still the second best in the world. But we used to have the best, and we will not be able to hang on to second place unless we recognise that, in many European universities—and many British ones—there is not much petrol left in the tank.
	The Chancellor, whose interest in higher education and research is absolutely genuine, is obviously impressed by American universities. I have just been in America, on eight or nine campuses in the past month. The main problem for the president or provost of an American university is how to spend the money. The main problem for the vice-chancellor of a British university is where the money will come from. We should recognise that that has consequences, and I come to one directly: Nobel prizes.
	In the first 30 years of the last century, French, British and German nationals won far more Nobel prizes in science and economics than America, which won 3 per cent of the total. Since 1970, America has won 60 per cent more than the whole of Europe combined. Our figures for the past few years look a bit better if you count the European academics who have done their research in America, but that is just an indication of the talent we are losing.
	If you ask, "What's it going to be like in a few years' time?" I can tell you. A few months ago, I chaired the panel proposing the names for the governing council of the European Research Council. One of the figures which most alarmed me showed that, a decade ago, half the young Europeans who went to America to do PhDs came back to Europe. The latest figure showed that a quarter came back to Europe. That is the reality.
	Most of the problems must be addressed by national governments. Some things could be done at the European level. The European Commission should do a lot more to look at individual countries' performance and scoreboard it. There should be a much bigger push on both the Bologna process and the attempt, at long last, to agree on a European patent, the absence of which is hugely costly for our innovators and inventors.
	I have three more points. First, we must ensure that the European Research Council, which is being established as a European version of the US National Science Foundation, is properly funded. Secondly, I hope that we can forget this idea of establishing a European institute of technology. It is an entirely half-baked idea, the result of somebody going to MIT and being impressed; that is not surprising—it is an extremely impressive higher education institution. However, while we are not sure whether a European institute of technology would be virtual, real, a networking or clusters, we know that a number of Members of the European Parliament are keen on it because they want to see an institute established in Strasbourg so that they can scarper back to Brussels. I rather sympathise with that, but it is not a good basis for establishing a new institute of technology. We also know that it is pretty insulting to the European institutions competing with the Massachusetts Institute of Technology, who could do so a lot better if they were as well funded. Also, if we go ahead with this—as I politely said—half-baked idea, it will inevitably take money from a limited research budget away from the European Research Council.
	Finally, the Prime Minister made an extremely good speech in the European Parliament last July, arguing that we should shift resources from the priorities of the 1950s and 1960s—the common agricultural policy and structural funds—and concentrate them on the priorities of a new century: competition, R&D, economic growth and the creation of jobs. The Sapir report had said this to the Commission in 2003. We fetched up, at the end of our presidency, agreeing to a budget in which we see a squeeze on R&D spending and an increase in spending on the common agricultural policy between now and 2013, from 40 to 44 per cent of the total budget.
	I guess, by and large, it was better to have a deal than no deal. But one must question the tactics by which the Prime Minister did not fight the deal between the French and the Germans in 2002 because he was worried that they might block enlargement, but instead chose to fight in 2005 on the much weaker ground of our own budget rebate. That was tactically extremely unwise, and has left us with a lousy budget settlement for growth and economic prospects for the next few years.
	I welcome this debate. I hope that this House can continue to blow the trumpet about the importance of higher education and R&D in this country and in Europe as a whole; and I hope that somebody out there will listen. I beg to move for Papers.

Lord Giddens: My Lords, I congratulate the noble Lord, Lord Patten of Barnes, on having initiated this debate and on having persuaded such an amazing number of noble Lords to contribute. Could this be the debate of the year? We will see.
	In Beijing, the Zhongguancun Science Park, which is in the academic district of Haidian, contains 68 universities and 213 research institutions, including the two most prestigious universities: Tsinghua and Beijing. Many international companies have located enterprises there, include Microsoft and Intel. This development, which goes along with those in India mentioned by the noble Lord, Lord Patten, marks a tremendous shift in the world economy. Many still think that China competes on the basis of low-grade manufacturing goods which get their competitiveness from the cheapness of their production. This is now completely wrong.
	Two American economists have a good way of portraying this: Schott—a somewhat unfortunate name—and Barnard. They have a kind of coloured triangle thing, which they use, first, to refer to the American economy in the early 1980s in relation to Chinese industries competing with American ones. When the triangle is blue, it means that the competition affects only low-grade manufacturing industries. As it turns red and orange, it means that the Chinese are competing with higher-grade industries, including knowledge-based and high-technology goods. It is amazing how that triangle changed over a period of no more than about 12 years, from the early 1980s to the midpoint of the 1990s. It all shifts towards the red and most of it shifts towards the orange, showing that the Chinese economy is competitive in something like 75 per cent of American industrial sectors. At the moment, the Chinese economy is targeting pharmaceutical industries. This is a massive shift in the competitive nature of the world economy. As the noble Lord said, it goes along with tremendous investments in higher education and technology in China and in India.
	It is to the Government's credit that they have recognised that and the importance of reacting to it, especially with the 10-year science and innovation investment framework. I was also impressed with two Treasury documents produced about two years ago: Long-term global economic challenges and opportunities for the UK and Long-term global economic challenges and opportunities for Europe. According to the 10-year framework, investment in research and development should reach 2.5 per cent of GDP by 2014. The current level is pretty low—only 1.9 per cent.
	I am pleased to say that the report recognises the point that the noble Lord, Lord Patten, made about the strength of British universities. In spite of what is said about universities being so shabby and people so poorly paid, the impact of British universities has been remarkable, especially in European terms, but also in world terms. As the report says, the UK ranks second to the US in terms of research excellence measured by citations in scientific subjects. My noble friend Lord Sainsbury has been an excellent science Minister. Anyone who has worked in universities will know him to be energetic and innovative. The Lisbon agenda initially proposed that 3 per cent of the GDP of EU countries would be spent on R&D by 2010. That estimate has sensibly been revised downwards to 2.2 per cent now; it was 1.9 per cent in 2000.
	I shall make four observations about the relationship between universities' research and development and business, because there are areas where European Union and, to some extent, UK national policy are getting it wrong—some of them were mentioned by the noble Lord, Lord Patten. First, it is doubtful whether European or national targets for research and development have any real economic significance. The reason is the globalisation of research and development, which is visible in the science park in China. Companies will go across the world wherever they can outsource research and development. That means that domestic research and development is likely to have an impact only if it is truly exceptional. There will no longer be much relationship in the global spread of companies between domestic research and development and domestic use of that research and development. That means that it is crucial to support centres of excellence. We can hope to prosper in this area only if we have centres of excellence in world terms in science and technology linked to business. We will not prosper by mediocre research and development in universities.
	Secondly, in the European Union and in the UK, the expansion of research and development is supposed to be driven mostly by companies; that is, by increasing expenditure from business. That is wholly unrealistic. Why should companies spend more on research and development? There are some sectors where it can be shown that research and development affects productivity, but most companies want to reduce the amount that they spend on research and development by outsourcing it. That is why they go in such numbers to China and other countries. It will be difficult to persuade industry to make the contribution to the overall EU target, even the lower one that the Commission has set. The same thing will be true in this country. The only way to counter that is through positive policy, through taxation incentives or other forms of incentive that would motivate companies to locate their research and development in Europe or the UK and to spend a bit more money on it than they might otherwise do.
	Thirdly, a lot of thinking about R&D, including the thinking in the 10-year framework, depends on what I would call an old-style model of science innovation. That model applies historically and to some industries today, such as the pharmaceutical industry, where there is a neat, MIT sort of relationship between a university and a business which feeds straight into the marketplace. But that is not how most innovation works in a modern economy. The noble Lord said something slightly caustic about the idea of a knowledge economy—he said that there was some truth to it—but it is the transformation of our times. A generation ago, about 40 per cent of the labour force worked in manufacture and in some countries more than 10 per cent worked in agriculture. The proportion in manufacture in the EU is now down to 15 per cent; in the UK, it is down to 12 per cent and, in the US, it is down to 10 per cent. The economy is completely different from that of the past. Well over 80 per cent of the labour force has to work in knowledge-based or service occupations. That is the nature of the modern economy. However, innovation in a knowledge-based service economy is not just driven by technology and old-style R&D. There is a terrific difference between innovation in markets and innovation in science. Only when the two are tied together does one get successful products. Look at the iPod: it was based on a technological breakthrough, but its appeal to style and taste, especially of teenagers, marketed it.
	Fourthly, a great deal of innovation and economic success in the new economy will depend not directly on science and technology—which I do not decry in any way—but on responding to changes in taste. Who knew that the British, who drank horrible coffee for such a long while, were harbouring a taste for the really nice coffee provided by Starbucks and other establishments? I am not sure that anybody knew. In the United States, the creative industries now account for 40 per cent of the net growth in the American economy; they depend a bit on science and technology, but that is not their central drive. Finally—

Lord Wallace of Saltaire: My Lords, it is a pleasure to follow my former boss. I pay tribute to the noble Lord, Lord Giddens, for the time that he spent as director of the London School of Economics, when he transformed a rather shabby campus and a series of extremely dirty buildings into a place that was a pleasure to work in. Even more important, he substantially increased the salaries of the professors, for which many of us are extremely grateful.
	I shall start with an apology. For the first time since I entered this House, I am unlikely to be able to stay until the end of the debate. That is because I am speaking at the University of York this evening. I will therefore be extremely brief.
	I wish to make two points. The first is on the regional balance of research and development in Britain. This is a centralised country. The reason why the universities that come highest in global rankings are Oxford, Cambridge, Imperial, University College London, the London School of Economics and King's College London is partly because we are such a centralised country.
	I started my career when I came back from the United States—as not enough of us do—at the University of Manchester. I am extremely glad that the Manchester/UMIST merger has created a major research centre in the north-west. I am glad that the University of Newcastle operates so effectively as a centre for regional regeneration and I welcome the White Rose University Consortium in Yorkshire—it is part of what I am talking about at the University of York this evening—which brings together research capacity within the region. I might also perhaps mention the University of Hull, which, among other things, has contributed more staff members to the Benches of this House than almost any other university in Britain.
	The White Rose University Consortium is crucial to the future of the northern economy. I am glad that the National Science Learning Centre and the Yorkshire research triangle contribute to that. The spillover from university research to business is crucial. Both companies that have their headquarters in Saltaire grew out of the University of Leeds computer and maths departments. That is the way we all must go forward. The co-operation in a knowledge triangle between business and universities cannot be purely national. This is one area in which universities on the Continent, partly because they are linked to regional government—in Barcelona, Baden-Württemberg and Bavaria—have better partners than we yet have in Britain.
	My second point relates to the proposal for a European institute of technology, which is linked to the Lisbon agenda. Again, I must declare a number of interests. My wife has been an employee of the European Research Institution; she was a member of the Sapir report and of the European Commission's advisory council on research framework 6. The communication from the Commission on the European institute of technology says that it is important,
	"Not to be constrained by the boundaries and obstacles which contribute to the fragmentation of European higher education and research today".
	Those obstacles come from within the state orientation of universities in a number of other European countries. I am painfully aware that in Belgium, Spain, Germany and Italy there is deep resistance to international exchange of staff. Universities are caught up with local power structures; universities in the Basque country prefer to appoint Basque academics and those in Catalonia, on the whole, prefer to appoint Catalan academics. We should be using the Bologna process to the full to promote a Europeanisation of universities on the Continent.
	UK universities, as the noble Lord, Lord Patten, pointed out, occupy 11 of the 30 top places in the Times Higher Education Supplement rankings, whereas German universities occupy only two and no Spanish or Italian universities feature at all. So we clearly have a number of difficult interests at stake.
	There are several useful European networks and funding programmes which help us to build closer co-operation among European universities—ERASMUS, Socrates, the Marie Curie network, the European Commission framework programmes for research and now the proposed European research council. I doubt the rationale for a European institute of technology, but we have to recognise that there is considerable weight behind the proposal. Therefore, I urge Her Majesty's Government to push for a virtual network and not for a physical site. The history of European institutions in this area is, after all, not entirely happy. The EURATOM Treaty proposed a European university of technology and set up a number of joint research centres, such as the European University Institute in Florence. Indeed, the final outcome of the proposal was established as a social science institute because it was cheaper and smaller. To establish a physical institute of technology would be very expensive; it would take a substantial chunk of the funds from the Commission's budget and require large additional spending from member states. The cost and size needed for this to be effective would be a major distraction from other priorities.
	So, I urge Her Majesty's Government to engage fully with the Bologna process in building closer links among European universities, such as those that British universities, including the London School of Economics, are actively engaged in establishing. We should support the proposal for a European research council and, on this new proposal, we should press for a virtual network at most, and certainly not something in Strasbourg.

Lord Rees of Ludlow: My Lords, I echo the views expressed by the noble Lord, Lord Patten, about the multifaceted role of universities in the UK and in Europe. I declare an interest as a professor at Cambridge University.
	Enhancing commercial spin-offs from academic research is rightly high on the Government's agenda, and universities like mine are responding. But the most crucial output of a university is high-quality graduates, feeding into the knowledge economy. How well they are taught depends on the quality of the university faculty. Those faculties perform other services. They are trusted sources of expertise over all issues that impinge on public policy, they pursue learning for its own sake and they can assimilate the 95 per cent of research not done in the UK.
	I find it disquieting that academic careers now seem less alluring than they did decades ago. Attracting and retaining outstanding people is hard when they have an enticing range of other career options. It requires a benign research environment, and without an influx of such people our universities will decline. We have a lot to lose. One should be cynical about the spurious precision of these various league tables, but, however you tot up the scores, the UK is way ahead of any country apart from the USA in the quality of our best universities. That is a competitive advantage we should cherish; but it is fragile, for reasons already mentioned by the noble Lord, Lord Patten.
	In particular, maths and the physical sciences are overall in a more precarious state than the biomedical sciences. There is a clear reason for that: the Wellcome Trust, the medical charities and the pharmaceutical industry supplement government funding of biosciences in a manner that has no full parallel for physical scientists. Many economically dominant technologies—from electronics to energy generation—rely on basic physics, chemistry and mathematics. Even in medicine, many advances depend on those subjects.
	Sustained expanding investment is essential, but other things are as well. We need to strengthen collaboration with Europe. There are, as has been said, few world-class universities on mainland Europe. That is partly because much of the best research done there is done outside the university system—by Max-Planck institutes in Germany and by CNRS in France.
	In "big sciences", the UK is already meshed into Europe. We belong to consortia that have been immensely successful. CERN in Geneva—more than 50 years old—is destined to be the world's leading laboratory in particle physics for at least the next 15 years. The European Southern Observatory now undoubtedly has the world's best telescopes. Europe has never had a space programme to match America, but even here the European Space Agency could gain ascendancy if it focused on science, miniaturisation and robotics, leaving NASA to squander its far larger budget on ill-conceived grand projects for manned spaceflight.
	International collaboration is mandatory, of course, in those capital-intensive flagship sciences, but European collaborations are strengthening across the whole of science. There has been a big change during recent decades. As a young researcher 30 years ago, I went to America as a post-doc. That is where I met my European counterparts: they all did the same thing. It is different now. Young scientists are more inclined to migrate within Europe. That is a healthy sign.
	The EU fellowships and network programmes have been effective catalysts. The European Research Council will also be a boost. We owe a debt to the noble Lord, Lord Patten, for his role in endowing it with a board that commands respect and support. The ERC should strengthen the leading European universities. That is indeed far better than setting up a new institute of technology.
	We in Europe fret about competition from the US but, as the noble Lord, Lord Giddens, emphasised, the Americans themselves should be anxious about the long-term challenge from China and India. In fact, a committee of the American academies, including the chairman of Intel and other heavyweight figures, recently published a hard-hitting report entitled, Rising above the Gathering Storm. It advocated an urgent programme to attract far more teachers and proposed that all foreign students who graduate in the US should be given expedited green cards to keep them in the country. The committee also recommended increased federal investment in the physical sciences and a new agency to sponsor energy research.
	If the Americans are anxious about long-term competition from the Far East, we should be doubly so. If the UK cannot sustain its competitive edge, we risk a downward spiral and Europe will decline with us. If we can sustain Britain's academic excellence and render this country a magnet for mobile talent, there is a huge upside. Excellence clusters together; talent attracts more talent. That is why our research universities matter and why we should welcome this debate.

Lord Parekh: My Lords, I begin by thanking the noble Lord, Lord Patten of Barnes, for introducing this extremely important and timely debate. I want to introduce a cautionary note. There is an increasing tendency to redefine the nature and role of the university almost entirely in economic terms. We are constantly told that the job of the university is to do research and that the research should aim at producing operational and practical knowledge that contributes to the economic development of the country. The European Council's Lisbon resolution, to which the noble Lord referred, states that the European Union should become,
	"the most competitive and knowledge-based economy in the world",
	and that the primary goal of the university is to help to achieve that.
	Although research oriented towards economic development is an important goal of the university, I shudder to think that it should be the only one. At the end of the day, the university is a deliberative, creative and carefully nurtured centre of reflection. It is a custodian of human civilisation and it is concerned to understand man's predicament and his place in the world. If that is its objective, two things follow. First, teaching is as important as research, because to transmit the available body of knowledge is just as important as to expand it. Secondly, not all expansion of knowledge involves research. What kind of research does the creative writer do? What of artists and philosophers, such as me? I cannot remember sitting in the library doing any kind of research. One's thinking goes on in one's head, sitting in the Chamber, observing people and, eventually, going home and writing about it.
	There is a tendency to think that all knowledge can somehow be fitted into the category of research. That is why, when we compare British universities with American universities, we make a very simple mistake. We look at the league tables—just as we hate league tables here, there is no reason why we should not maintain the same attitude of suspicion towards international league tables—and say how low we are. Let us remember that the league table is based on research as defined in terms of scientific knowledge. If we were to dispense with the category of research and talk in terms of knowledge, I have no doubt that Europe would be at the top of the table. If we consider philosophers, artists, great writers and poets, many American universities—or even the United States as a whole—would not be able to hold up to what is happening in Europe.
	I say that not to stand up for Europe or to stand against the United States, but simply to state that the purpose of the university is far more than to produce scientific research and contribute to economic development. I have been watching that tendency since the late 1970s and early 1980s. That has led to the marginalisation of some very important areas of research in universities. Increasingly, when universities are financially squeezed—my noble friend Lord Giddens can bear me out on this—there has been pressure to squeeze out philosophy, theology, art, literature and classical languages. That is not the way to proceed.
	So, before I talk about the importance of research, I want to put down a marker for other disciplines that cannot be fitted into the category of research. Ultimately, universities should be judged not just by their contribution to research and economic development but by their contribution to the understanding of human civilisation, and given credit for that.
	I turn to research, which, as I said, is certainly one important purpose of the university. Here, the record of European universities is quite impressive but, as the noble Lord, Lord Patten, and others have pointed out, it could be better and is not as good as that of the United States. We need to ask ourselves why that is so. In my view, research ultimately depends on five important factors. First, it requires funding. Secondly, it requires talented people who are prepared to opt for research rather than other things. Thirdly, it requires academics to have free time to concentrate on research rather than being cluttered with administration, teaching and other things. Fourthly, it requires imaginative exploration of new areas; and, fifthly, it requires absence of bureaucratic rigidity. I submit that those five factors ultimately decide the quality of research available in any country. I say that as an ex-vice-chancellor and as someone who has been involved in observing how research is done.
	Before I run out of time, let me say something briefly, not about all of those five factors, but about two or three important ones. Let us take funding. First, European universities spend 1.1 per cent of gross domestic product, as opposed to 2.6 per cent in the United States. Secondly, in the United States, funding is concentrated in some universities. There are 4,000 institutions of higher education, but only 550 award doctorates, of which only 125 are research universities. Of them, only 50 have 80 per cent of the research talent available. Thirdly, industry contributes a large amount of money in the United States—$2.3 billion, compared to $920 million in European universities, although the population is roughly the same. Fourthly, the United States has more foundations than we have and its institutions have a skilful way of getting money out of their alumni—I saw that very clearly when I was a professor at Harvard—whereas our universities have great problems struggling to get such money. It is therefore important that there should be greater collaboration between universities and industry.
	Secondly, do talented people opt for research? Sadly, in European universities, they do not; in the United States, they do. We produce roughly the same number of science and technology graduates as the United States, yet we have roughly one third of the number engaged in research in the United States. How do we explain that gap? We can explain it in two ways. First, there are very few research jobs in universities. Because industry does not concentrate on research and development, there are no jobs in industry either where graduate students could go. In the United States, 83 per cent of postdoctoral fellows are absorbed in business or industry. In Japan, the figure is 66 per cent. In Europe, it is just under 50 per cent. It is also important to bear in mind that European universities are very heavily dependent on overseas students. In our country, 37 per cent of 104,000 postgraduates are from overseas, and that number will decline as India and China begin to develop their own centres of excellence.
	I have one last point to make, and then I shall stop. When it comes to genuine research of the kind that the noble Lord, Lord Giddens, and others were talking about, we need to break away from disciplinary boundaries. Indeed, we need not only interdisciplinary research, which is as far as European universities seem to have got, but trans-disciplinary research in which we begin to create and to put together new ways of looking at things, and not only across different boundaries. We are an old continent and universities have got stuck in rigid modes, so we have not really explored the possibility of new kinds of trans-disciplinary approaches. Harvard, for example, has a wonderful centre for genomics and proteonics, which I saw when I was there. It draws in physicists, biologists and professors of chemistry and mathematics with a view to studying the structure of biologically-relevant macromolecules. Something like this would be relatively unthinkable in many European universities.
	These are some of the issues that we need to address if we want European universities to be even better than American universities, not simply equal to them, and, more importantly, if we want them to be true to their own tradition.

Baroness Carnegy of Lour: My Lords, we are indeed fortunate nowadays to have in our midst someone with the combination of experience of international and practical politics and current university involvement possessed by my noble friend Lord Patten. Personally, I found his speech absolutely fascinating and, to a degree, inspiring. I hope that we shall hear a lot more from him in these debates. From the fairly humble position of someone in close contact with two or three universities, I want to touch on two points.
	My first point is that the other day we discussed at great length in this House the research assessment exercise. One important point was not properly made. We need a simpler system for assessing research for funding. The problem is that it must not be so simple that it does not allow for the very wide variation in the circumstances of different universities. For example, some small universities enjoy a big national and international reputation in research. Any new system must deal fairly with them. The University of St Andrews is an outstanding example. A comparatively small university with only 5,500 students in a small town, its teaching and research, of necessity, cover a limited portfolio of academic areas. Yet its research is world class and, in UK terms, at the top. In such a case, it is clear that any quality assessment cannot be based simply on the amount of research done and the raw statistics of output. Assessments must also reflect the standing of the institution in the world's wider academic community.
	Another example referred to by the noble Lord, Lord Patel, was the University of Dundee. It is a large institution whose research is strongly skewed towards biomedicine. As a result, some 45 per cent of its work is charity funded. That will present problems for assessment because charity funding is treated differently in the assessment system. It is another example of an "unusual" university that has to be taken into account.
	My second point relates to how the Government view the contribution that universities make to the economy, a matter discussed very skilfully by the noble Lord, Lord Parekh, and my noble friend Lord Norton. The Government rightly understand and support the direct commercialisation of research, but I am not at all sure that they appreciate as clearly the wider part of the picture that the noble Lords have been discussing. That wider part is less tangible and less measurable—and the Government prefer that which they can measure.
	When visiting Dundee earlier in the year, Mr Gordon Brown opened the university's new drug discovery unit. It is a big, £13 million project, which has been funded to the tune of £8 million by the Wellcome Trust. It is the only one of its kind in Europe and is designed to tackle some of the world's most neglected, devastating diseases in places such as sub-Saharan Africa and India. Mr Brown was enthusiastic and said:
	"Remarkably, 16 per cent of the local economy is based on the life sciences and biotechnology; and we have an incredibly important life-sciences cluster here [in Dundee] matched only by Cambridge and London . . . the future of the Dundee economy is inextricably linked to what is going on in the university".
	The Chancellor doubtless had in mind the 16 spin-off companies created in the last decade by Dundee—nine of them in life sciences and medical devices—and the many other potentially profitable activities in Dundee.
	I wonder whether he also included in his calculation what a university can contribute to the economy by producing well educated, capable and imaginative people, full of enthusiasm to be entrepreneurs in the variety of areas of business life. Dundee, with a far too small private sector, desperately needs such people, as does all of Scotland and, indeed, the United Kingdom.
	My noble friend Lord Patten reminded us that the Chancellor admires the United States university system. St Andrew's University tells me that technological institutions such as the Massachusetts Institute of Technology generate only 1.2 per cent of their income from direct commercialisation of research. The huge wealth created in Boston comes not from projects but from people moving out from MIT and the other local universities into a private sector driven by an unrestricted entrepreneurial spirit.
	As the noble Lord, Lord Parekh, and my noble friend Lord Norton have emphasised, the key is surely attracting top scholars and researchers—in the arts and sciences—to universities that are not compartmentalised and where the creative process can flourish for everyone. To be such places, with such ambitions, is surely the most important economic contribution that universities can make. That, above all, must be the aim of our universities, in this country and in Europe. It must also be the Government's aim for our universities.

Baroness O'Neill of Bengarve: My Lords, we are all indebted to the noble Lord, Lord Patten of Barnes, for instituting the debate. I think we all agree with him that without investment we do not get research, and that that investment is, in this context, to a very considerable part public investment. Taking that as read, it is very important for us to think about how public investment is funnelled towards research and development in the universities in this country, and whether we are doing it in the best way, because we are on the edge of a period of likely change.
	Looking at the Science and Innovation Investment Framework report—and, in particular, the Next Steps document, which we had an opportunity to discuss rather briefly the other day—there is one extraordinarily welcome element in the current proposals: that is, that the Government intend to retain the current dual support system for funding university research, which has served us well. The dual support system separates funding for specific research projects, which is awarded on a competitive basis by the research councils, from QR research funding, which is paid directly to the universities through the higher education funding councils and then distributed by them in accordance with their research strategies. That second element of dual support is crucial for research in the humanities and social sciences.
	In this regard, I disagree with the noble Lord, Lord Parekh, because the only reason I have had time, over many decades in this university system, to be, as the phrase is, "research active" is because a proportion of my pay has been based on that funding stream. I declare an interest on that account and as president of the British Academy, the national academy for the humanities and social sciences, where we have, of course, an exceptionally wide range of diverse disciplines to think about.
	At present, the QR funding that each university receives is determined by the quality of its research in each subject area, as judged by the research assessment exercise—the next exercise will take place in 2008—which uses peer review to judge research, subject by subject, university by university, across the UK. As is widely agreed, the research assessment exercise has brought great benefit to the quality and productivity of UK university research.
	But it has at least three linked defects. I say "at least" because the obvious one is that a great many academics do not love it. We shall put that aside. The RAE is laborious and expensive and, in some cases, university departments and universities have gamed the system. There is no doubt about that. The Government propose that after the RAE of 2008, a metrics-based system will be introduced, which will undoubtedly be simpler and cheaper to operate. At present there is a committee, jointly chaired by Professor David Eastwood, the incoming chief executive of the Higher Education Funding Council for England, and Sir Alan Wilson of the Department for Education and Skills. They are working towards a shadow metrics system to be used in parallel with the 2008 research assessment exercise, after which the intention is to drop the research assessment exercise and rely solely on metrics. The universities welcome the intention to test the proposed metrics before they are introduced. I think they would also welcome simpler and cheaper systems.
	But there is widespread, and not entirely ill founded, scepticism whether such systems can be found. It is well known that many metrics are problematic, especially in the humanities and social sciences. Citation indices are unreliable in these subjects because of the variety of practices in publishing and citation. Attempts to rank journals may alter the number of submissions they acquire and their reputation—and hence their quality—and so compromise the purported measurements. Monographs are of varied quality and importance. They are the easiest and the hardest art form. What matters for research assessment is not quantity but quality of research, and no set of metrics will be adequate unless it can measure quality as reliably as peer review does.
	This is not a marginal matter—not even an economically marginal matter. The economic value of research in humanities and social sciences may seem harder to quantify than that of some research in the natural sciences and engineering but their economic contribution is enormous, and it is not just a contribution to the heritage industry. Just as it would be absurd to value science and engineering only for their economic contribution and to neglect their huge contribution to culture, design and public life, so it would be absurd to value the humanities and the social sciences only for their contribution to culture, design and public life and ignore their economic contribution. The British Academy recently published a report under the title of Adam Smith's famous phrase,
	"that full complement of riches",
	which amply demonstrates the breadth, size and diversity of the contributions of the humanities and social sciences to economic, cultural and public life in this nation.
	The Next Steps report that the Government published at the time of the Budget points to the possibility of relying on metrics, but also to the even simpler method of relying on the very high correlation between the present two streams of research funding. It suggests that research grant income, allocated on a competitive basis using peer review, could provide a metric for distributing QR funding. That is pretty appealing at first glance. Peer review is laborious. We are doing it twice, making prospective judgments in allocating research grants, and then retrospective judgments under the RAE. As my noble friend Lord May of Oxford said in an address to the Royal Society when he was president,
	"it is time to stop arranging the deckchairs, no matter how thoughtfully and carefully, on two entirely different ships which ultimately have the same destination".
	This thought convinces only if moving to metrics can be done with limited adverse consequences, yet we have every reason to expect that reliance on research grant income as a metric for allocating the QR stream of funding would fall foul of Goodhart's law, which states that,
	"any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes".
	That was pithily rephrased by Professor Marilyn Strathearn as:
	"When a measure becomes a target, it ceases to be a good measure".
	There are many reasons for expecting adverse effects if both funding streams are based on a single judgment of quality. The most obvious one is that universities would then have very strong incentives to use their QR funding mainly to support subjects that reliably bring in grant money. The correlation between the two streams would, of course, be perfect.
	If the dual support system is to continue to support quality and diversity of research, as it has done, we must keep adequate separation between the streams. Perhaps we can move to some metrics. Perhaps we can find a less disruptive, expensive and distorting approach than the present RAE. But the point is to support and nourish good research and I would like to finish by asking the Minister how the Government propose to test new proposals for metrics against the likelihood that they will create perverse incentives and damage research.

Lord Howarth of Newport: My Lords, the noble Lord, Lord Patten, has preached us a sermon—and a splendid sermon it was—but the Government have also provided a useful text for our meditations in the document Next Steps, which advises us that the United Kingdom must move up the value chain to sustain world-class universities and the highest quality of research and get better at translating all this into innovative products and services. The Government should be praised for this analysis and, as a more acid test, they should be praised for the large increases that they have provided for research. The science budget is planned to reach levels that are beyond any dreams of avarice that I would have dared to entertain as science Minister 15 years ago. The Government should be praised also for their energy in bringing together academia and business.
	I praise the Government also for their recognition of the value of academic freedom and of blue-skies research. That proposition is not one that you would axiomatically expect to emanate from the Treasury and the DTI. The DTI has naturally and appropriately been exercised by how we can move the fruits of the laboratory into the showroom. However, if we are ultimately to be fully competitive, we must invest in originality. Too much concentration on applied and contract research on yesterday's knowledge jeopardises inquiry and academic originality. It is an irony that an excessively instrumental view of research may cause us to miss the best opportunities that universities have to contribute to economic development. The Government appear to understand this, although there is a worrying note in the Next Steps document at paragraph 1.10, in which the Government state that they believe that it is necessary to ensure that the UK's science and innovation system is more responsive to economic and public policy priorities.
	I would like to ask the Minister a question about the Government's decision to extend the research and development tax credits to businesses employing 250 to 500 employees. A lot of money is now tied up in the R&D tax credits. Since 2000, £1.5 billion has gone to 20,000 firms by this route. What evaluation have the Government made that has caused them to feel justified in extending this arrangement? Fifteen years ago, I looked with my officials at the case for additional tax relief on R&D. We concluded then that well-targeted grants would provide better value. I wonder why we were wrong.
	Like the noble Baroness, Lady O'Neill, I praise the Government for their commitment to the dual-support system. I do so with a slight feeling of relief, as it was not certain that they would make that commitment. However, it means that research universities will be able to develop their own strategies and to manage their research and teaching together to fund the individual academic who may not benefit from research council funding, and to sustain the old-fashioned and essential concept of the university as a place where students are taught by people who are in the lead in their academic discipline and where teaching means personal, close and continuing engagement.
	The radical proposal in the document is the discontinuation of the RAE. I want to put in a good word for the RAE. It has been a great force for good. Academic friends confide to me now that Mrs Thatcher and Sir Keith Joseph were probably right to go on the warpath in the early 1980s and that probably too much research that was publicly funded with no questions asked was, shall we say, a little laid back. Sir Peter Swinnerton-Dyer saw the writing on the wall and separated teaching from research. He said that research funding—the QR funding—could in future be distributed on merit. By 1989, considerable sums of money were being shifted around the system. Of course, people complained and Sir Peter Swinnerton-Dyer was seen as the Torquemada of the academic system, although academics are often their own worst tormentors through the complexity of the systems that they design.
	The five RAEs have improved vastly the professionalism of research management. The writers of the document are pleased to state—and we ought to be pleased to read—that the United Kingdom leads the G7 in the productivity of its research base. If the upshot of the five successive RAEs is that we now have five or six universities in this country which are as distinguished as any in the world, closely followed by another 15 or so that are clearly world class, that is grounds for some satisfaction. We certainly cannot say that the system has been a failure. Of course, there is the difficulty that those elite universities scoop the QR pool, resulting in the phenomenon of the squeezed middle. Universities which are household names and have a history as research universities find it increasingly difficult to sustain their life as research universities. However, there is no realistic prospect that research funding by the Government will grow at a rate that gives much help to them. Perhaps there is a case for saying that the RAE has done its job and run its course, and that it is reasonable therefore to look for a simpler system that does not involve some of the distortions that the RAE probably creates.
	I shall not say anything about the system of metrics that the Government propose, because the noble Lord, Lord Norton, the noble Baroness, Lady O'Neill, and others have already spoken very well about it, but I add my commendation to the Government to take seriously the HEPI study, Using metrics to allocate research funds, which articulates some serious difficulties about the move to a system of metrics. I note that UUK states that, if there must be a system of metrics, there must be a sophisticated enough range of metrics. I see the dream of a simpler, less burdensome administrative system fading away. It is certainly sensible of the Government to propose running a shadow system of metrics in parallel with the 2008 RAE; there is plenty of time to think about it and get it right in the wake of 2008.
	The ghost at the feast is, as the noble Lord, Lord Patten, clearly suggested to us, the insufficiency of funding overall for higher education in Britain. The Government's vision is for sustainable and financially robust universities throughout the United Kingdom, but we cannot say that that is where we are. The costs of expansion have been huge and the jam has been spread thinly in many areas. There are many other compelling claims on the education budget, such as early years education and schools education, which is ultimately beneficial to the universities; but in the meantime, of course, the universities are competing with those other claims for the money.
	The Government have been right to increase rapidly their spending on further education, but it does mean that there is not enough for higher education. There is a worry about a loss of regional spread of really excellent universities. Everywhere, except among vice-chancellors, pay is inadequate, as the noble Lord, Lord Rees of Ludlow, explained. Junior lecturers are in some cases paid less than primary school teachers, whom I do not belittle, but junior lecturers as new academics start to earn late and little. They are clever people and they increasingly say that this opportunity cost of going into academia for a career is a price that they are not willing to pay. If we are to replenish our enlarged academic system with people of the quality that we need, the Government must address this problem, because it is fundamental to the future of our universities.

Baroness Rawlings: My Lords, I, too, thank my noble friend Lord Patten of Barnes for initiating this debate so clearly and eloquently. It is, indeed, timely, following the Chancellor of the Exchequer's announcement in March proposing "significant changes" in the way that research funding is allocated to our universities.
	I declare my interest as chairman of King's College, London, a fine institution that will no doubt be affected by the outcome of the review. King's currently has 24 subject areas awarded the highest rating of 5*, and 5 for research quality in the most recent research assessment exercise, demonstrating excellence at an international level. It is also one of the UK's top seven generators for research earnings, with income from grants and contracts of more than £99 million in 2003–04. Therefore, the wider public importance of university research is highly relevant to King's. It is a serious supplier of research to government departments, notably in defence, biomedicine and health policy. The college is particularly proud, too, to be home to four Medical Research Council centres—more than a quarter of the national total.
	However, it was a little disconcerting for King's, a member of the Russell Group, to find that major changes to research funding and the research councils were announced alongside the Chancellor's Budget Statement. Those proposals throw into doubt even the long-scheduled research assessment exercise in 2008 and prescribe a new method of assessment thereafter. The Chancellor's proposals also envisage major changes to the research councils, which will be "radically simplified", particularly with a merger of the Medical Research Council and the research and development activities of the National Health Service.
	The Chancellor does not exactly have a track record of bringing simplicity to any process or structure that he has reviewed in the 10 years that he has been in office. Yet, prior to these announcements, there has been a minimum of consultation either with the universities or with their representative organisations. We have grown used to analysing the small print of Budget day publications for important, but unheralded, announcements. If the Government want higher education to continue to play an important part in the success of this country—and I am sure that they do—they need to consult more widely on issues such as these and to listen to what the universities themselves have to say.
	Their input is particularly relevant. During the past year, the universities have been systematically discussing the future of research assessment and, in collaboration with colleagues in the health service, the future of NHS research and development. Like any system, the current research assessment exercise—the RAE, which has been mentioned many times today—has its faults. In due course, it will need substantial reform. In designing any new system, the Government must ensure that they introduce not only a fair allocation of funding, but provide the right incentives to help universities adapt to the new international environment.
	As the noble Baroness, Lady Warwick, the chief executive of Universities UK said, we should have "an open mind" as to what should happen after the next RAE. I am sorry that she was unable to be in her place for some of this instructive, outstanding debate—the kind in which your Lordships always excel.
	We cannot forget that in 2006–07 the Higher Education Funding Council for England will distribute £6.7 billion of which £l.34 billion will be for research. Despite that sum, the United States is, as we heard from my noble friend Lord Patten, the most important source of top-quality research, with the UK coming second. Over the coming years, however, we must expect China and India to make themselves felt as major players in basic, as well as applied, research. This highly competitive situation will require imaginative responses from Britain's universities and from the Government.
	Any future system for allocating research support, as many noble Lords have stressed, should not only support basic research but recognise the importance of the successful application of research to the country's social and economic needs, encouraging, too, approaches that cut across established disciplines and develop commercial applications when relevant. We have done much of both at King's.
	Although our universities are already major global players, we need to recognise that they will need to become even more outward-looking, establishing ever-more successful partnerships with the best universities in the US, Europe and elsewhere, not least in China and India. Universities are ready and eager to play their part and what we require from the Government is partnership, consultation and support.
	The Chancellor says that he wishes to "simplify" the RAE, but at the same time he must simplify the system for business to help higher education, as the noble Lord, Lord Broers, said, and encourage more strategic partnerships in research between the public and the private sectors; most importantly he must provide better tax incentives for charitable giving for higher education institutions. I repeat that he must provide better tax incentives for charitable giving to higher education institutions, because that is so important. Only if those are encouraged will we retain our leading position as a provider of the finest research.
	There is an old country saying which is relevant to any search for wisdom on a difficult issue: "Ask the fellows who cut the hay". In the case of research policy, the hay cutters are the country's major research universities. In that context, can the Minister assure me and other noble Lords involved with research universities that the views of these institutions will weigh heavily in the forthcoming consultations relating to the research assessment exercise and the organisation of research grant funding bodies, notably in biomedicine?

Lord Winston: My Lords, five years ago we set up at Hammersmith Hospital, as part of Imperial College, a state of the art, six storey building—the Institute of Reproductive and Developmental Biology, housing up to 130 scientists. One of the things that we did on the five laboratory floors was to ensure that there were curved walls going right across the laboratory so that we could hang up our posters so that the public could be engaged with the science that we were doing. Health and safety decided that the posters constituted a fire risk. Each week I put my posters up and each week they are taken down.
	I want to discuss the issue of regulation and how it affects research and focus on an area which has not been very much concentrated on but which is extremely important to research and development; that is, the medical schools in Britain and Europe. Your Lordships will be aware that one of the areas where we clearly lead, partly because of liberal legislation, is in stem cell biology. At least we should lead but, sadly, if you look at the publication record, you will see that over the past three or four years—I have done the index to look at this—Singapore and Israel together have published more than Britain. I believe that their combined population is that of London.
	I must declare an interest as an academic at Imperial College who has floated a university spin-off company which is involved with stem cell research. Three years ago, before the company was finally formed, I applied for a Home Office licence to inject six pigs with a gene construct which was completely non-toxic and which could cause no possible damage to the pigs. We simply wanted to see what happened to their sperm. It took 13 months for the approval of that application. In the meantime, while the company was being set up with an investment of £3 million—not a huge sum but enough to employ the eight people and the resources that I needed—we applied to the local ethics committee—the Government's own ethics committee—for ethical approval to compare stem cells in embryos with stem cells taken from the testis. There is reason to believe that the adult cells in the human testis might be a way of avoiding the complexities and the ethical difficulties of using embryos. In order to do that you need to culture the two types of stem cells in parallel and compare them and their gene expression.
	After four months, because of the queue, the application was looked at. The consent form that we had designed was a matter of dubiety, but not the research, which was returned. It took us a little while to decide how best to deal with the consent form. It was sent back. After nine months from the original application, consent was given for our research. We then, of course, had to apply to the Human Fertilisation and Embryology Authority—that paragon of virtue—for ethical approval. After three months it considered our application and returned it because in its view the consent form was not adequate. Actually, some of the things that it wanted in the consent form were things which our ethics committee had refused. So we went back, revised the consent form and I heard this week that it has now been approved by our ethics committee and it has now gone back to the Human Fertilisation and Embryology Authority.
	We now face the peer review of our research. This week, I wrote to the HFEA asking why an anonymous peer review of an ethical application was required. I understand that it would be required if we were in pursuit of public funds or, indeed, if we were trying to publish our results, but, not unreasonably, as researchers we did not particularly want to show all our cards to the reviewer. In the end, the review that we had was absolutely scathing: it was misleading, scientifically inaccurate, misspelt and grammatically incorrect. Frankly, it was a disgrace to the person who wrote it. I asked the HFEA this week whether, in the spirit of openness and transparency, the person responsible might be revealed to us so that we could at least discuss the application. That has been refused. Although I am here, I understand that today my laboratory is being inspected by the HFEA. I must tell your Lordships that it is a state-of-the-art laboratory. We are using cells that are being thrown away and are of no use to anyone, and we do not intend to treat any human being with them. They are effectively dead cells.
	The HFEA has inspected these laboratories on a previous occasion and has found them to be a paragon of virtue. But, for some reason, because this is a new application, we have to undergo another inspection. It is possible that, by the time our grant runs out at the end of this financial year, the £3 million will have been spent and we will finally have approval to do the work. This is an example of work that is investment, with venture capitalists who want to help us, but which has completely failed to produce its objective in the stem cell biology field.
	That may be an extreme example but it raises a very serious issue in regard to medical schools. At present, for all sorts of reasons, there is a huge disincentive to carry out research and development work. Undoubtedly, one issue is regulation. Dr Kate Hardy, a leading human embryologist, worked in my group for many years but eventually, two years ago, she gave up human embryology because of the attitude that the work that she was doing was in some way disreputable and required extra surveillance by the HFEA. She decided that that was just too much and she has now gone into a completely different field which does not involve human embryology. That is a loss to our subject. In addition to the other problems in universities, that is an area that we need to look into urgently.

Baroness Sharp of Guildford: My Lords, I join others in thanking the noble Lord, Lord Patten, for initiating this very timely and fascinating debate. I declare an interest as having been, for the past 20 years, an academic at the Science and Technology Policy Research Unit of the University of Sussex and remaining a visiting Fellow of that unit.
	Pondering the title of this debate—the role of British and European universities in the promotion of R&D—took me back 10 years to a project in which I was engaged at the Science and Technology Policy Research Unit for a report for the Treasury. Effectively, the question that we asked was: what does Britain gain from basic research? The classical view—this was referred to by the noble Lord, Lord Giddens—is one that we have sometimes dubbed the "linear" view of R&D. It is the input/output model in which basic research leads to applied research, and applied research leads to new products and processes. It is a linear process.
	What came out of our research was that we rejected, to a degree, the concept of the linear process and pointed out that the great benefit deriving from research came through people and through the knowledge passed on by people. One of the major benefits of undertaking basic research is to provide us with an entry ticket into global research. As the noble Lord, Lord Rees, said, the UK publishes between 8 and 10 per cent of the world's publications in science and technology, and therefore rather more than 90 per cent is published elsewhere. If we are to access and understand what is being published elsewhere, we must have people who are trained in the leading edge of research so that they can understand and translate that research. That is the case whether they are working with their colleagues in an academic environment or whether they are working in a corporate environment so that the knowledge can be used within that environment.
	The purpose of R&D is therefore not only to generate new ideas and new knowledge but, crucially, to train people in leading-edge scientific and technological techniques and to provide an entry ticket into international networks. That, in turn, enables us to make use of the international science base.
	The noble Lord, Lord Patten, mentioned that the UK's aspiration is to increase the proportion of GDP going to R&D from the current 1.9 per cent to 2.5 per cent. The sad part about the current situation is that only 10 years ago the figure was 2.1 per cent rather than 1.9 per cent of GDP. In other words, R&D as a proportion of GDP has slipped over the past 10 years, and the main cause of that slippage has been not the public sector, which has increased its share, but the corporate sector.
	That poses a real problem for Britain if we are to gain access to important international networks. Eighty per cent of R&D spending is on people. The noble Baroness, Lady Warwick, mentioned that there are three areas of R&D in the corporate sector: biotechnology, pharmaceuticals and aerospace. Outside these, practically no companies in Britain are doing R&D. In this sense, universities play a part in basic research. They have an absolutely vital role in maintaining links with these international global networks.
	The noble Lord, Lord Patten, mentioned the degree to which the universities went through a funding famine, and how important funding is for R&D. The 1980s and 1990s were an era of famine for universities. This has changed, and I pay tribute to the Government, particularly the noble Lord, Lord Sainsbury of Turville, for having considerably reversed the squeezing of R&D budgets. Indeed, it is one of the few areas of public sector spending which has been increasing much faster than the rate of growth—a 4 to 5 per cent increase in the funding of university R&D. It may not be enough, and much of it has gone into new plant, buildings and equipment. As the noble Lord, Lord Rees, mentioned, much less has gone into salaries, which remain uncompetitive in this sector. If people are the key to this sector, that is a real problem. It is vital that we attract the bright young brains into it. Again, one of the important aspects is operating though collaborative programmes and getting these young people involved in them.
	However, as these funds were squeezed, so a mechanism for rationing was developed: the RAE, about which we have had quite a lot of discussion. It has both its upside and downside. All of us are well aware of the difficulties in humanities and the arts. The noble Baroness, Lady Rawlings, mentioned the suddenness of these decisions. On the one hand, there was the decision about the RAE in the Budget report; on the other, as mentioned by the noble Lord, Lord Patten, there was the merging of the NHS and the MRC. Nobody has asked what on earth the Treasury is doing announcing decisions overnight, without any consultation, about these important issues. Frankly, the area should be governed by an independent organisation, the Higher Education Funding Council for England, set apart from the Government because it is supposed to be independent and not influenced by political decision.
	There has been quite a lot of discussion about European programmes. When I was at Sussex, I played a considerable part as a member of collaborations and in cataloguing the development of the European framework programmes. Both the exchange programmes—ERASMUS, Socrates and the Marie Curie scholarships—and the framework programme itself have established and catalysed an important pattern of collaboration which we are now extending, and not only with the advanced countries. One criticism at the end of the 1990s was over our collaboration with European rather than American universities. With such collaborations as the MIT/Cambridge, this has begun to be answered. We are also now establishing new collaborations with India, China and Singapore, which are very important. The whole process of knowledge transfer comes as much through people and their moving about as it does through mechanisms for establishing it.
	We talked about the European Research Council, and the possibility of a European institute of technology. Although most people are supportive of some notion of establishing a European Research Council, considerable scepticism has been expressed over the proposals for EIT. I have a lot of sympathy with Andrew Duff, a Liberal Democrat MEP for the East Anglian region, who said that if there is going to be a European institute of technology it should be in Cambridge, not Strasbourg or anywhere else.
	Over the past few years, we have seen a sea change in the role played by universities in the knowledge transfer business. I began my career at SPRU by looking at biotechnology. There was an internecine battle between the MRC and the SERC over the development of the biotechnology directorate, because it was establishing a directed pattern of research. Directed research was, by definition for the MRC, unproductive. Nowadays, as the Lambert report identified, there is a totally different pattern.
	I conclude by bringing the attention of noble Lords, once again, to the developments at Newcastle, where one sees a university being the hub for regenerating a whole area.

Lord McKenzie of Luton: My Lords, this is the third occasion on which your Lordships have debated research and development in the past few weeks. The debates prompted by the noble Lord, Lord Williams, and the noble Baroness, Lady Greenfield, concentrated on the important issue of the domestic research environment. Today's debate, however, has given us a welcome invitation to broaden our horizons and to consider UK research in its international context. I am grateful to the noble Lord, Lord Patten, for giving us this opportunity as well as to other noble Lords who have contributed this afternoon. It has indeed been a debate of the very highest quality.
	I know that my noble friend Lord Sainsbury, the science Minister, given his huge commitment to this area, regrets not being able to reply to the debate but he is, fittingly, on a government science mission to China. I am sure that he will read the record with interest. If time does not allow me to respond to all the salient points I will respond in writing to any outstanding questions.
	Research is by definition a fluid and dynamic phenomenon. If these successive debates have revealed one thing, it is that there is broad agreement on all sides of the House about how much research contributes to our national wealth, health, education, environment and culture. Perhaps I may first mention what the Government are doing to secure the future of our domestic science base. In July 2004, the Government published the first ever long-term vision for UK science in the 10-year science and innovation investment framework, a vision backed by hard cash and increased investment in university research.
	At the broadest level, we have substantially increased funding for both streams of the dual support system for university research. We have increased quality-related funding through the Education Funding Councils, and in less than a decade we have more than doubled the science budget from £1.3 billion to £3.4 billion. Perhaps I may say to the noble Lord, Lord Patten—who I think questioned the Government's funding of HE generally—that, since 2000, the Government have maintained the unit of resource per student as against the sharp decline under the last government. We are committed to continue to do that as the new additional fees paid by students are introduced. This has been a significant boost to the university sector and is quite apart from the significant additional real resources for university research.
	Taking on board the recommendations of the report of the noble Lord, Lord Dearing, we have made major steps in addressing decades of previous underinvestment in our university research infrastructure. The Science Research Investment Fund is now a dedicated funding stream of £500 million a year. There has been a renaissance in new building and in the upgrading of our university science laboratories. One headline project with which the noble Lord, Lord Patten, will be particularly familiar is the contribution of more than £100 million made to Oxford for the information engineering building project, which brings a range of applications, from medical imaging to aerospace, to increase productive research collaboration and sharing of ideas.
	The Government have also put in place reforms to the dual support system to ensure the long-term sustainability of university research and are now investing £200 million per annum new money to enable research councils to pay 80 per cent of the full economic cost of the research that they commission.
	In recent years the Government have also done much to attract and retain the most talented researchers at our universities. Sir Gareth Roberts' review into the supply of people with science, technology, engineering and mathematics skills—STEM skills—identified a number of issues that were adversely affecting the appeal of those careers, including a lack of clear career structure, uncertain career prospects, unsatisfactory training and increasingly uncompetitive salaries.
	Through the research councils, we have introduced a series of measures to begin to help to tackle these issues. Some £185 million in new money has been used to provide a stipend of at least £12,000 tax-free to research council PhD students; transferable skills training for both PhD students and postdoctoral researchers; and increases in researchers' salaries in areas that experience recruitment and retention difficulties. The new academic fellowship scheme has created 1,000 new fellowships over five years and provides stable routes into academic careers. However, as the noble Lord, Lord Broers, reminded us, we need to ensure that world-class facilities are provided if we are to attract and inspire the best.
	Combined with other changes such as the fixed-term employee regulations, those measures have resulted in significant cultural changes in higher education institutions. The funding for skills training has enabled universities considerably to expand their training and support for researchers and PhD students. However, I am conscious of the comments of the noble Lord, Lord Rees, that we need to ensure that they are made more alluring. My noble friend Lord Howarth asked about the promotion of academic careers. There is no evidence of a university recruitment crisis. PhD numbers in this country are buoyant and an unprecedented amount of support and guidance is available to those who are contemplating a research career in this country.
	Looking ahead, we are mapping the principles of the European researchers' charter and the code of conduct for the recruitment of researchers. Today, technology and scientific understanding are changing our world faster than ever before and developments in information and communication technology, new materials, biotechnology, new fuels and nanotechnology are unleashing new waves of innovation and creating many opportunities for entrepreneurial businesses to gain competitive advantage. Competition grows ever stronger, not just from our traditional G8 rivals but from the rapidly growing China and India. As ever, my noble friend Lord Giddens spoke with authority about that, as did other noble Lords. We need to ensure that as much as possible of our world-class research leads to world-class products and companies. We were also reminded by my noble friend Lord Parekh that universities are not just about turning out units of production; they are about reflection enhancing civilisation and about ensuring that teaching, as well as R&D, is fully supported.
	During the past eight years we have provided our universities with incentives for knowledge-transfer through schemes such as University Challenge, Science Enterprise Centres and now the Higher Education Innovation Fund. We are beginning to see significant results. During the past two years alone, 20 spin-outs from UK universities were floated on the stock market with a combined value of over £1 billion. Since 1997, the value of collaborative research between universities and business has increased by more than 50 per cent. I could give many excellent examples of recent success stories. Isis Innovation, Oxford's technology transfer company, for example, has assisted in the formation of 49 university spin-out companies. I was interested to hear about Dundee University's spin-outs and the work that has been done there. The Advanced Manufacturing Research Centre, a $26.5 million collaboration between Boeing and Sheffield University, is working on ways of making the new Boeing 7E7 quieter and more efficient, cutting emissions by 20 per cent and fuel-burn by 18 per cent.
	My noble friend Lord Haskel stressed the benefit of technology transfer, as did other noble Lords, and the mutual benefits to universities and to business. He spoke about the matrix of innovation across disciplines—a theme pursued by other noble Lords as well. I agree with his comments on that.
	The noble Lords, Lord Dearing and Lord Wallace of Saltaire, and my noble friend Lord Judd also spoke about the regional dimension. I should point out that we now have a science council in every region, and six science cities are being developed through the RDAs, which is a good route through which to pursue these issues. There is no direct government role or funding in this, but there is the potential to access the science research infrastructure fund and the higher education innovation fund.
	If we widen our perspective somewhat, we will see that many of the factors relevant to our national research performance also apply at the European level. The growing development of a truly European dimension for science and research has been one of the less heralded aspects of European development. Nevertheless, we maintain that it has been a success story, and one that probably deserves to be highlighted more than it generally is. In the past two decades, the EU has steadily reinforced its efforts to promote and support research activity through a series of framework programmes. As a result, Europe has made significant steps towards the establishment of a genuine internal market for science and technology in which universities have played a major role.
	Nevertheless, I think we would all recognise that more needs to be done to strengthen the EU's research base. In particular, Europe needs to enhance further the environment for the basic research primarily undertaken by universities and public-sector research establishments. This in no way contradicts the Government's wish to see research contributing to competitiveness at the UK and European level. High-quality basic research is essential if the European science base is to remain competitive on the global stage, and it is an essential precondition for a research-intensive economy. Without a flow of innovative basic research, we have no hope of ever making Europe the competitive research-driven economy that we wish it to become.
	Of course, European basic research already has its strengths. Nevertheless, despite having an overall level of funding approximately equivalent to that of the US, the impact of European basic research is lower than that of the US when measured in terms of the top 1 per cent of the most cited papers. Despite recent awards, Europe still lags behind the US in the total number of Nobel prizes it achieves. There is widespread agreement that the fragmentation of basic research across member states and the absence of systematic Europe-wide competition for research funding are restraining Europe's ability to increase its competitiveness in basic research. As the noble Lord, Lord Hannay of Chiswick, said, there is no case for doing nothing. For this reason, the UK strongly supports the establishment of a European research council to fund science-driven research within the context of the next framework programme. The aim of the ERC is clear: to drive up the quality of European basic research by providing something that has never existed before, an arena in which all Europe's scientists can compete against each other for funding on a truly continental scale. I believe this generally has had the support of noble Lords contributing to the debate today.
	Obviously there are certain conditions which we feel an ERC would have to meet in order to achieve this aim of enhancing the environment for European research. It must, so far as possible, be effectively independent both from the European Commission and from member states and be able to pursue its own science-driven agenda, run by scientists for scientists. The noble Lord himself has been a key contributor to developing European policy in this area in the work that he undertook to select a high-quality team to serve in the inaugural Scientific Council of the ERC. He did an excellent job, which deserves the recognition of this House.
	The council, chaired by Professor Fotis Kafatos of Imperial College, is now getting down to work. We wish it well in the vital task which lies before it: to create a structure that will attract the very best researchers in Europe to seek ERC funding. Its success in this mission will make a major contribution to the future development of European science and in particular to the role that European universities can play in this development.
	A number of noble Lords spoke about the concept of the European institute of technology. I think that they all disapproved, including the noble Lord, Lord Patten, and the noble Baroness, Lady Thomas, who reminded us that just because something is labelled as part of the Lisbon agenda it should not automatically get the box ticked. The noble Lord, Lord Hannay, had some concerns about it, as did my noble friend Lady Warwick and the noble Baroness, Lady Sharp.
	We believe that the Commission's objectives are sound. The problem of Europe's poor performance in exploiting research needs to be tackled. Links between industry and universities need to be improved. However, we cannot see many incentives for industry or top universities to participate in the Commission's current model. In its proposal on Next Steps, the Commission should ensure proper consultation with business and universities on how best to achieve its objectives, including consideration of other options. The UK should be at the forefront of pushing consideration in those areas.
	I turn finally to the global position of UK research and how it is closely linked to the attractiveness of our universities to students from other countries. On that subject, I would like to make three main points. First, the international reputation of UK universities has never been higher. We remain strong internationally in terms of achievement, productivity and efficiency, second only in the world to the US, with a fraction of their overall spending. Where some countries excel in individual disciplines the UK has consistently sustained high performance across the broad range of scientific disciplines, from the biological sciences through to the arts and humanities. Any changes to the process of funding must enhance and not diminish that.
	A number of noble Lords spoke about the research assessment exercise. In particular, my noble friends Lord Grabiner, Lord Judd, Lord Howarth and Lord Haskel, the noble Lords, Lord Broers, Lord Norton, Lord Patel and Lord Dearing, and the noble Baronesses, Lady O'Neill, Lady Carnegy, Lady Buscombe and Lady Rawlings, each had a view. Of course, that matter was discussed a few weeks ago in a debate initiated by my noble friend Lord Williams of Elvel. I read Hansard on it yesterday and would recommend it to noble Lords, some of whom I know participated in that debate.
	We should recognise, as did my noble friend Lord Howarth, that since RAE was introduced 20 years ago, research quality has risen significantly. Now, more than half of all academics work in departments rated in the top five or five star 2001 ratings. In response to the noble Baroness, Lady O'Neill, we plan to continue, and will continue, with dual support systems for the reasons that she identified. Of course, we are in a situation where we are about to consult on a metric-based research assessment system, with the object of making it less onerous on universities. I am conscious of the wide spread of opinions annunciated today on that. Obviously, the concept is to focus on one or more metric statistics that can be used to assess research quality.
	I assure my noble friend Lord Haskel that it is most unlikely that citations would be the sole criterion as an outcome from that. The working group is drawing up consultation proposals, which will be published in May with the hope that conclusions can be reached in time for the Pre-Budget Report. My response to the noble Baroness, Lady Rawlings, is that there should be a genuine and intense consultation process. On the basis of today's contributions, I cannot imagine that it would not be.
	I would stress that the Government see it as an imperative that any new funding arrangement will continue to reward excellent research of all types, from curiosity-driven to user-focused research. Any system should facilitate collaboration between different disciplines and must not squeeze out the humanities and social sciences—an issue on which my noble friend Lord Judd spoke with considerable passion. Consultation, I believe, is the appropriate form in which to explore the issue raised in particular by the noble Baroness, Lady O'Neill, to make sure that any change to the system does not create a potential for perverse incentives.
	I turn finally to the global position of UK research and how this is closely linked to the attractiveness of our universities to students from other countries. On this subject, I should like to make a few points. The UK publishes 13 per cent of the world's most frequently cited scientific papers and leads the G8 in terms of papers published and citations acquired per researcher. According to last year's survey of international research performance by Shanghai University, we have seven universities in the world's top 100, more than any other country except the USA and more than the rest of Europe put together. Various other equivalent statistics were quoted in the debate. No doubt many noble Lords will distrust to some extent university league tables of this sort, but nevertheless I believe that this and several other international comparisons give a clear indication of the esteem in which UK higher education in general is held across the globe. If that were not the case, UK universities would not be bringing almost £4 billion of export income into the economy.
	I should add that perhaps the most compelling indicator of the high international standing of UK universities is the number of overseas students, especially at postgraduate level, who choose to study in this country rather than elsewhere in the English-speaking world. At this point perhaps I may pick up the issue of health research funding, a point raised by several noble Lords, in particular the noble Lord, Lord Patel, and the noble Baroness, Lady Rawlings. Your Lordships will be aware that the aim of the proposals being considered is to maximise the impact of Medical Research Council funded research and the Department of Health's R&D funded research. This has enormous potential, but the details of the review are still being finalised and it is not yet clear whether we will focus solely on research funded by the MRC or whether the review will include aspects of health-related research funded by other research councils.
	In conclusion, over the past decade the Government have done much to foster research and development in UK universities. Since 1997 we have doubled the science budget. Funding is an issue that has properly received recognition by the noble Baroness, Lady Sharp, among others. We have invested with the Wellcome Trust over £2.6 billion in renewing our science research infrastructure and we are now investing more than £100 million a year in knowledge transfer and knowledge networks, and £100 million for research careers, including more for science PhDs. Our goal now is to increase the UK's total private and public investment in R&D as a proportion of GDP from its current 1.8 per cent to 2.5 per cent by 2014. Doing this will put the UK at the forefront of European countries and substantially close the gap with the US. We should recognise that that is a demanding target but an achievable one. We have done much, but there remains much to do. This year's Budget saw the publication of the next step in the Government's 10-year framework for science and innovation, including a number of proposed reforms to extend tax credits. I will write to my noble friend Lord Howarth about the basis of our concluding that that is the route we should adopt.
	We shall further develop the role of the Technology Strategy Board, create a large facilities research council and, as we touched on earlier in the debate, develop reforms to simplify the research assessment exercise. The noble Baroness, Lady Warwick, spoke of the importance of these commitments, in particular with regard to the next comprehensive spending round and funding for the third leg. The noble Baroness, Lady Rawlings, and the noble Lord, Lord Soulsby, raised the issue of better tax incentives for charitable giving for research. We debated the position of charitable remainder trusts, which the Treasury keeps under review, but, whatever their benefits, they have been associated in the US with estate duty planning.
	Our world-class universities have an integral part to play in—to use the words of my right honourable friend the Chancellor of the Exchequer—making,
	"Britain one of the most competitive locations for science, research and development, and for innovation".

Lord Patten of Barnes: My Lords, I thank the Minister for that comprehensive reply to what has been an extremely good and interesting debate. I am pleased that we had the opportunity to have the debate today and I am grateful to all noble Lords who have taken part in it.
	Following on from the point by the noble Baroness, Lady Warwick, that we face a public spending review, I believe that we will return to that subject fairly regularly over the coming months because I suspect that higher education will not be unscathed as a result of that review. I hope that I am wrong.
	Obviously I cannot comment on all the points made. I am very pleased that Newcastle's aspiration to become a science city has been welcomed, and I hope that the Government will respond in the best possible way by opening their cheque book. The proposal for a European institute of technology has not received a standing ovation—not even a crouching ovation—and I hope that that will be noted in the European Commission.
	Perhaps I may finish by making a point about competition internationally. The noble Lord, Lord Hannay, made a valuable point about the extent of the crisis we face in Europe. It is a paradox that at the end of this period of extraordinary prosperity in Europe—the continent that discovered universities, for heaven's sake, if you leave aside Fez—we fetch up giving universities a lower priority and seeing the gap between ourselves and the United States open increasingly. I have often made speeches in the past about the gap in security spending between ourselves and the United States. I am much more concerned about the gap in spending on knowledge, research and scholarship. We have to be aware of it.
	I was in India a few weeks ago as the chairman of the UK-India Round Table. We were discussing the £2 million a year that the Government have made available for links between our education system and India. The next week, Mr Larry Summers, following our announcement of £2 million a year, announced that Harvard was going to provide a dozen chairs for Indians and provide free education at Harvard for everyone qualified from an income of less than $40,000 a year. The competition out there is extremely hot and we have to make sure that we invest enough in our higher education in the future. I beg leave to withdraw the Motion for Papers.

Lord Brooke of Sutton Mandeville: My Lords, it is a pleasure to follow the noble Baroness, Lady Hollis of Heigham, whose extensive experience in local government in Norwich and Norfolk far exceeds my 18 months at the London Borough of Camden, although in those far-off days when my party held Camden for the only time, 18 months there seemed like 18 years elsewhere.
	My noble friend Lord Bowness, whose local government experience in south London and in local government generally is as long as my experience was short, is to be warmly congratulated on the timeliness of the debate that he so ably initiated. The debate is an excellent instance of serendipitous self-regulation in your Lordships' House in that speeches of Conservative Members, whose choice of debate this is, alternate with impeccable symmetry with Members of the other two parties, themselves alternating precisely, too.
	Some six weeks ago, in a chance late-night conversation with a senior member of the Lobby, I said that the political climate was developing at least a whiff of the stench of a decaying government, which I could recall from the winter of 1978-79. He said, "Oh, surely not, Peter", but if I was wrong then, I think that I am nearer to being right six weeks later. It is against that background that a Government, whose earlier essays into local government reform at a national level have not met with spectacular success, are at least exploring another much more sweeping reorganisation. It is a tribute to the stamina of the Deputy Prime Minister that he is thinking of coming back for more.
	We had a Written Answer from Mr Woolas in late February to tell us that no decisions had been made but that a wide-ranging debate was going on and that the position would be finalised at about the same time as the publication of the proposed White Paper. That phraseology sounds more like a positive decision that a negative one. If the White Paper passes over the option, however, the option seems happily less likely to resurrect itself thereafter, as the outlook for the public finances worsens in anticipation of the Comprehensive Spending Review.
	The noble Lord, Lord Rooker, himself a veteran of previous local government debates in your Lordships' House—notably the paving debates that led to the debacle of the referendum in the north-east—said last night, on the Northern Ireland order on local government, that there would be no new money for the proposed reorganisation there. Reorganisations of local government on this side of the Irish Sea, however, do not come cheap.
	I appreciate that the Office of the Deputy Prime Minister may have embarked on its current review in times sunnier for the Government. I realise that personal preoccupation with their individual political legacies is beginning to clog up the arteries at the highest levels of the administration. I acknowledge that those members of the Government who most often have to sit examinations on the West Lothian question have not yet reached a pass mark, yet courageously but masochistically return to see if another answer will do better, so that the full business of devolution will be done and dusted.
	It will be interesting, when the Minister winds up, to learn precisely how the sub-questions being postulated in consultations will contribute, if at all, to resolving the continuing conundrum set by the Father of the House of Commons emeritus, Mr Tam Dalyell. It will also be interesting to hear if any advance in inducements is being contemplated by Ministers, beyond that of the housing offered in the regional government paving Bill. In the meantime, we on these Benches believe that greater devolution of power to local government, so that more decisions can be made nearer to those directly affected—always a sign of health in any human organisation—remains our watchword; one which, in these centralising times, is a better index of democracy and a better amulet against popular frustration.
	The rumours on the Rialto are of an emphasis on unitary authorities, shaded by further powers for unelected regional apparatchiks. When the regional government paving Bill was going through, I remarked across the Chamber that it seemed Orwellian to be holding referendums statutorily to set up regional assemblies when several regions had already created them without benefit of statute—a poor man's version, if you like. The noble Lord, Lord Rooker, who is nothing if not candid, agreed that it was a bit Orwellian. In a later Starred Question, I asked the noble Lord, Lord Bassam, whether he agreed with his noble friend on this point. As I recall, he said that he supposed that he agreed with his noble friend on almost everything. When the Minister comes to regional arrangements in her speech—which rumours in the bazaars have foreshadowed—it will be interesting to see if she agrees as well.
	Finally, there is a happy moment in the late Claud Cockburn's memoirs, when, after schools at Oxford, he goes to say goodbye to his tutor at Keeble, who sends him on his way with the words, "Up to now, Cockburn, your life has been punctuated by examinations; but from here on out you will have a clear run through to the grave". As the West Lothian question is alive and well, the Government have not yet reached Cockburn's sunny uplands. It still looks as if it will be a close run thing between the question's final answer, and this Government's arrival at the grave.

Baroness Hanham: My Lords, I thank the noble Lord, Lord Bowness, very much for securing and introducing the debate. I congratulate him on putting his finger firmly on a number of serious areas of current concern about the structure and powers of local government and its make-up, the vagaries about its finances and, as other speakers have mentioned, the imposition of administrative means of running councils—such as cabinets, which have not been widely welcomed and have left many councillors adrift with insufficient knowledge of what is going on.
	We have had some excellent speeches this afternoon. Many of them have demonstrated an underlying frustration not with local government, but with what is going on in it—its inability to deliver what it wants for all the reasons that have been put into words today. My noble friend Lady Byford demonstrated clearly the problem in rural local government with housing—the inability of local authorities, including county councils, to have real control. I was fascinated by the speech of the noble Baroness, Lady Hollis, which clearly brought home the difficulties of running city government. She must have been a great leader when she was there and clearly enjoyed it. Unfortunately, my noble friend Lord Brooke is not still running Camden council—it would be a great deal better if he was. He gave us his usual words of wisdom about the Lothian question. The noble Baroness, Lady Maddock, also demonstrated some of the frustrations that we feel.
	I must declare an interest as a currently elected member of the very excellent royal borough of Kensington and Chelsea. I am standing for re-election, so I am thick in politics at the moment and hearing what people in the area are saying. As our royal borough is so excellent and is running such great services, I do not receive many comments about problems associated with the local council, but one of the main subjects raised is the congestion charge and the inclusion of the royal borough within it. That was resisted strongly by the local council—by councillors, by residents, by anti-congestion charge groups and, overwhelmingly, by respondents to at least two consultations.
	I see the noble Lord, Lord Bassam, muttering in the ear of the noble Baroness, Lady Andrews, that that has nothing to do with local government, but I say that because, as a result of the complete lack of attention paid to the views of local people by the Mayor of London, there is enormous cynicism about the value of democratic involvement. The local authority is unable to protect its residents from the wilful decisions of the strategic authority. That is of no benefit in increasing the number of electors who will turn out to vote. They think that it is not worth it because no one—certainly not the Mayor—pays any attention to what they have said. Why should they bother? That is terrible.
	Even in London, the Mayor is seen as remote, out of touch, interfering and uncontrollable by the Greater London Assembly. It is no surprise, with that example, that elected regional government was comprehensively rejected. The noble Lord, Lord Bowness, touched on the problems resulting from the Government's unremitting desire to meddle with the structures of local responsibility by forging ahead with moving more and more responsibility to non-elected assemblies, including matters that fundamentally affect local people, such as—I realise that, as it stands, this is strategic—planning, housing, economic development and transport. There is also the extremely overhasty and ill considered removal of the police to a regional level. This is despite the electorate's antipathy to the remoteness of bodies based at regional level, whatever that really is.
	I return to the Mayor of London, who is much on my mind at the moment, because he is also seeking to take on a strategic role for housing and planning, which are not currently his responsibilities. The Government are now considering these proposals as part of their wider review of local government structures and responsibilities.
	We have heard about the wider review. We are being told that it will be subject to a White Paper in, I believe, July, and we are led to understand that it will build on the extended remit given to Sir Michael Lyons and his inquiry, and on the very undercover proposals for wholesale structural reform which emanated from Mr David Miliband. The Government originally hotly denied that these proposals existed. They came to light only as a result of a memorandum leaked to the Daily Telegraph in November, and have had some limited exposure—more by gossip, I am bound to say, than by any formal consultation.
	I remember, when the memorandum was leaked, inviting the Minister to comment on what I described as the Miliband review—I am glad to see that the name is now sticking—but that invitation was without success. A Miliband review there surely was, and what is now being demonstrated as a result of that would mean, as other speakers have said, a really fundamental shake-up of the current structures of local government. The imposition of unitary local government across England's 34 counties, inevitably involving the loss or absorption of counties and districts into units of an unknown size or geography, or however they were going to be structured, would inevitably reduce the number of councillors. In other words, there would be a massive shake-up, and for what purpose?
	As other speakers have said, local government should by definition be local. All parties are signed up to localism. But, to this Government, localism seems to be local beneath regional. I must tell the Minister that such reorganisation is not wanted, and there appears to be no reasonable rationale to justify it. It would deliver nothing but the loss of our shire counties, and would be massively expensive.
	It is estimated that to create one unitary authority for each county would cost at least £1 billion per new authority—or between £200 and £350 per household—just under £2 billion for two authorities, and £3 billion if there were three. What a waste of taxpayers' money, although that would not be the first instance of that for this Government. It has also been suggested that local elections in 2007 would be scrapped while these proposals were being developed. The Minister may like to comment on that, because that is a very firm rumour. That would be a further denial of the important role of democracy.
	Are the Government intending to push ahead from a White Paper to legislation without proper debate or manifesto proposal? Even Phil Woolas, the Minister in the other place, is reported to have said that there is no clear democratic mandate for any structural overhaul. The Government have a very poor record of recognising the important impact of constitutional changes. They have a rotten grasp of the importance of history and tradition, and I hope that the Minister will give a clear commitment today to ensure that any proposals that emanate from these reviews will be put to the electorate before they are implemented.
	While these plans are being gestated, further changes are being made to the powers of local government. Not satisfied with taking into the bailiwick of the Treasury the Deputy Prime Minister's responsibilities for housing by instigating the Barker report, the Chancellor has now gone a step further and asked her to undertake a review of land planning use and planning policy. While there were many good things in the initial Barker report, the maintenance and control of the development of housing by local authorities was not one of them. It does not augur well for Barker's views on planning. Housing and planning are matters of immediate local concern.
	The increasing reduction in local accountability for planning decisions, as highlighted by my noble friend Lord Bowness, and the reduction in the concept that decisions about things that matter to local people should take place at local level are becoming more apparent every day. That this is happening is increasingly being noticed by the people who matter—the electorate. However, the electorate have so far had no opportunity to consider whether they want radical changes made to the level of government which affects their lives most.
	This Government appear to have decided that devolution to the local level means devolving only from government to the regions. As has been made clear on many occasions, a Conservative government will sweep away the apparatus of regionalism. Regional assemblies would be abolished and their powers over planning, housing, transport and all the other myriad bodies that are parasitically attached to them would be returned to local control.
	This Government have a propensity for reorganisation, or perhaps more accurately for what they call modernisation, in all areas of public service. Experience from the health service, in particular, suggests that a little change at a time would be more beneficial than attempting to make fundamental changes all at the same time, finding that they do not work and making further structural changes before the last ones have been given any chance to work. The Government's intention with local government seems to have the same danger signals. Decisions on housing, education, planning, economic viability, transport and health all need to be sensitive to the local communities, and not taken further from them by the Government. There is a real role for local authorities to play. They must be given the opportunity to do that. It must be left with them at a local level.
	We have heard much today about the value of local councillors. Being one of them, I hesitate to add my voice to that. Local representation, and the fact that people are committed to helping and working with their local communities, is one of the most valuable assets that we have in this country. We prejudice that at our peril. There is a very real danger that local government is becoming completely disconnected, for the reasons that I have mentioned, from its local community. If we are not careful, we will find that local people will not want to represent their local communities. That would be a disaster.

Lord Bowness: My Lords, I thank all Members of the House who have participated in this debate. I thank particularly the Minister for her reply. I am sure that all who have taken part in the debate will have taken comfort from her assurances that changes will be driven from below and not imposed from above. We will carry her words away with us.
	I remain concerned by some of the planning practices to which I referred. I understand entirely the concerns and frustrations expressed by the noble Baroness, Lady Hollis of Heigham, about the status of Norwich. Most people apart from a few diehards in the counties at the time would have conceded unitary status to the former county boroughs outside the metropolitan counties, but that is not an argument for unitary status everywhere. It does not follow that two-tier government should be abolished everywhere; that falls into the one-size-fits-all trap. Perhaps it is a heresy to suggest—it will no doubt be greeted with derision from all quarters of the House—that the pre-1974 structure of county boroughs, municipal boroughs and urban and rural districts had something from which could learn in terms of flexibility and meeting the needs of different communities in different parts of the country.

Lord Patel: My Lords, I apologise to the House for the switch in the list of speakers. I also apologise to the Front Benches if I have to leave before the end of the debate. I do not do so lightly, but I have another engagement that I cannot get out of. I am grateful to the Minister in that regard.
	I thank the noble Baroness, Lady Perry of Southwark, for her excellent chairmanship. It was a pleasure and a privilege to be a member of her committee. I also take the opportunity to thank our Clerk, Dr Christopher Johnson, and our specialist adviser, Roland Clift, for their unstinting support and advice.
	I want briefly to address two areas where I think that the Government's response requires further clarification. Those areas are documented in our report in chapter 8, entitled "Developing markets for heat", and in chapter 11, entitled "The longer term: Research". I know that if the noble Lord, Lord Wade of Chorlton, had been here to speak today, he, as president of the Combined Heat and Power Association, would have had more to say than I shall.
	From the evidence that we heard, from the reports on the visits to parts of Europe and from what I had seen, I was much impressed at how markets for heat had been developed in countries such as Sweden and Denmark, to mention but two from my previous visits. As our report states, demand for low-grade heat—that is, energy delivered at temperatures between ambient and the boiling point of water—for space and water heating represents a major proportion of the United Kingdom's energy demand. Domestic and water heating alone comprise around a quarter of total UK energy use. The development of effective markets for such low-grade heat could thus deliver significant carbon savings.
	While I accept that not all these potential benefits are explicitly to do with energy efficiency, they are closely linked. Government energy policy has hitherto consistently overlooked heat, concentrating instead on electricity, industrial process and transport. One example is the lack of any attempt to collect and use the large quantities of heat produced by power stations, and the energy lost via cooling towers. The absence of markets for heat has been identified by the Royal Commission on Environmental Pollution as one of the principal reasons why bioenergy has not delivered in the United Kingdom as it has elsewhere in Europe.
	There is also resistance from other sectors, particularly the building industry, in construction and development. There is an inherent conservatism in the building industry. Representatives of the House Builders Federation, for instance, told us that they could see no advantage in community heating for individual customers, citing the potential for losing energy through distribution ducting as one of the disadvantages. That is quite contrary to what the committee saw in Sweden, particularly in Gothenburg, where it was stated that the heat loss from ducting was of the order of 7 to 8 per cent from the entire 700-kilometre network.
	The conservatism of the construction industry is compounded by a lack of leadership from central government, and the Government's response documented that to a degree. I hope the Minister will take the opportunity to rectify that today, however, and no doubt correct me in my assertion. He may even announce robust, forward-thinking policy initiatives to encourage the building industry and others to develop markets for heat. As we said in the report, the most important and practical barrier to a community scheme is the initial capital cost. To overcome this and other barriers requires positive action to promote a market for heat.
	The Government have an important role to play. Again, as we stated, there is a clear need for a few larger-scale developments which can be promoted as demonstrations of the value and potential scope of heat provision. The proposed development of new housing in south-east England, with its high density, offers an extraordinary opportunity to develop community heating, but requires government action to make it happen. I hope the Minister will comment.
	I briefly turn to longer-term research. The Government's stated long-term goal is to reduce emissions to around 65 metric tonnes of carbon per year by 2050, from today's carbon emissions of around 150 metric tonnes. An achievement on such a scale would require a well resourced and co-ordinated programme of research and development. Again, the government response and the evidence in our report is not reassuring. Again, however, I have no doubt that the Minister will emphatically reassure us today.
	Certainly, the written and oral evidence we received from Research Councils UK and other witnesses failed to provide a clear picture of the level of funding and co-ordination of the UK research effort. For instance, direct government funding was channelled though no fewer than five departments. Even the level of funding from the Government, stated as £10 million, is in conflict with the data we received from IEA, according to which the level of UK funding in energy conservation and R&D in 2002–03 was zero.
	I acknowledge that, during the course of our inquiry, the Government announced an increase in funding to £70 million by 2007–08, from the science budget of energy R&D. This is welcome, but increased funding will be effective only if there is a strong research base in place. As Professor Skea emphasised in his evidence, in order to increase training capacity and gradually begin to develop courses, there is a need to raise funding as this capacity in people increases, particularly in the field of energy conservation. The Government need to signal a long-term commitment to this.

Lord Lewis of Newnham: My Lords, as a member of the committee, I thank the noble Baroness, Lady Perry of Southwark, for her excellent chairmanship of the committee. It was a pleasure to be chaired by a professional. I also take this opportunity to thank our support staff.
	As has been stated, the concerns with the problems of energy efficiency are related to the difficulties associated with carbon dioxide emissions and the potential for global warming. As the noble Baroness, Lady Sharp, indicated, the coverage of the report is extremely broad and I will concentrate on two aspects of it: the construction of new houses and the supply of heat to communities. I know that previous speakers have already touched on those points.
	A major programme is being mounted for the construction of housing, mainly in the south-east of the country. That gives a great impetus for the inclusion in those houses of modern developments that have occurred in house design, with particular reference to energy-saving procedures. It is important to recognise that buildings contribute 46 per cent of greenhouse emissions and thus provide an important target for reductions in emissions. The Government propose to build one million new houses by 2010, and we were concerned by some of the comments we received on the effectiveness of the present building regulations and their implementation by the building industry.
	The new variations in part L of the building regulations that have been introduced since the publication of our report are clearly a move in the right direction. They have the potential to improve energy standards by up to 40 per cent, but I echo the plea of the committee that the standard still falls far short of best building-energy standards in Europe. I welcome the Government's plan to introduce a new code for sustainable housing, utilising the EcoHomes standards and rating homes on a scale of zero to five in relation to their energy efficiency and carbon emissions—the five rating essentially corresponding to a carbon-neutral situation. We were told that that building condition has been illustrated by the BRE. It is pleasing to note that the new code will also include water efficiency standards, an area that has been neglected in previous regulations and is particularly important in water conservation. That subject is under particular pressure at the moment and is of major concern, particularly in the part of the country that is being proposed for the development of new buildings in the Government's plans. However, I have worries about the implementation of these plans as they are based on a voluntary scheme, and there seems to be little fiscal incentive to participate in it.
	The enforcement of the present building regulations was criticised by a number of the groups that we interviewed, as was noted by previous speakers. Although local authorities check plans for agreement with the building regulations as a prerequisite for planning permission, the checking and inspection of the final buildings for compliance is less effective. That position is further compounded by the fact that it is now possible to use approved inspectors who are not under the control of local authorities to give what is termed "self-certification". Professor Strong of the BRE told us that that procedure is believed to be driving down the quality of enforcement. He gave us a number of examples of non-compliance. I shall site two, although I know that one has been mentioned. In a survey conducted by the Building Research Establishment, two-thirds of domestic buildings failed to attain the 2005 standard for air permeability and, as the noble Baroness, Lady Sharp, pointed out, that regulation is three times less stringent than the German standard.
	In addition, houses which met government standards by including condensing boilers in their design often had them replaced by conventional boilers, thus reducing the cost and the energy efficiency very considerably. Interestingly, the position of houses that fail to comply with building regulations is not clear. We were informed,
	"that there is no final sanction for buildings that fail to comply".
	I do not find the Government's comment in their response to the report on this position very consoling. They said:
	"One of the findings of the Energy Efficiency Innovation Review was that while levels of non-compliance may be high, the impact on carbon savings appears to be comparatively low".
	An admission that non-compliance is high seems to me to be a rather remarkable statement to be making, and I would certainly appreciate the Minister's views on it.
	This also raises the position of inspectors and inspections. The inspection will place a great load on the inspectorate as a whole. It has been pointed out by BRE that at the moment no arrangements appear to have been made for the training of this cohort.
	There is a corresponding potential problem with the supply of trained members of the construction industry. That point is touched on in the Government's reply, but there appears still to be a significant problem. That point was further emphasised by the noble Lord, Lord Harrison, in a Starred Question in the House last Thursday. He raised the problem of the recruitment of the skilled workers who will be required for the construction of the buildings associated with the Olympic Games in 2012. He stated that the construction industry estimates a requirement of 88,000 new entries per year, while the national skills agency for construction proposes only 20,000. There is a significant gap in those figures.
	In addition to the quantity of workers, there is also a quality problem. As we note in our report:
	"Skills shortages are compounded by a widespread culture of sloppy workmanship and cost cutting by builders. This must change and in tandem with improved enforcement of building standards we recommend that the Government strengthens the legal rights of purchasers who acquire poorly built properties".
	The Government do not discuss that point in their reply. Perhaps the Minister will comment.
	As pointed out by the Royal Institution of Chartered Surveyors, in addition to how we use power, we have to consider how we generate the power. Perhaps I may just consider that. It is pleasing to note that in the proposed new code for sustainable homes, credit will be given for the inclusion of micro-renewables such as wind turbines and solar panels in buildings. In our visit to Leicester City Council, we were told that it had developed a "solar rental" project, where residents are able to rent solar panels to provide hot water; the rental cost being offset against savings in gas and electricity. Leicester also has a well developed district heating system providing heat for 4,000 dwellings. At the moment this is gas-fired CHP plant, but there are plans to utilise a biomass generator. The position of district heating was also illustrated in the visit to Sweden and Germany where a variety of heat sources were employed, including incineration of waste.
	The Government's energy policy has overlooked heat as an energy source, as pointed out by my noble friend Lord Patel, and has concentrated mainly on electricity, industrial processes and transport. In the production of energy from a power station, approximately one-third of the energy is transposed to electricity and two-thirds is dissipated as heat lost into the atmosphere. That is a remarkable statistic.
	In addition to the potential utilisation of this form of heat loss, there are other carbon-neutral sources such as biomass, energy from agricultural, forestry crops and waste, as well as solid waste. As pointed out by the Royal Commission on Environmental Pollution, the lack of markets for heat was one of the reasons why bio-energy has not developed in the way that it has in Europe.
	In the 1950-1970 period, criticism was levelled at community heating schemes that had a poor record in this country on the basis of heat loss during distribution. In the visits to Sweden and Germany we inquired about the distribution losses. We were told that they were of the order of 7 to 8 per cent. That is significantly lower, or at least comparable, to the losses in distribution of electricity via the grid system. The incinerator recently built in Sheffield is, among many things, contributing to the heating of homes, the University of Sheffield, the University of Hallam, swimming pools, hotels, public amenities such as city hall, libraries, museums and schools, as well as local hospitals. That in itself is an impressive display of what can happen if we plan on a reasonably large scale.
	In marked contrast to that, SELCHP, the London incinerator at Lewisham, which has been in operation for a number of years, has the potential to heat homes, but none of that heat is being utilised for home heating. There is clearly great potential for the use of incinerators of waste products to produce energy. That must apply to many new developments being constructed. That is especially important with the redefinition of the use of incineration of waste in the waste framework directive. It is now possible with high-efficiency incinerators to redefine waste as recovery rather than disposal. That has important implications. As well as reducing CO2 emissions, the gas emissions from an incinerator at a point source may give the opportunity for sequestration of carbon dioxide emissions.
	I appreciate that the Government have provided about £40 million to boost local heating schemes, but how many schemes that include combined heat and power or incinerator programmes are being considered for the provision of heat to buildings in the new building programmes; and how many of the present incinerators using waste will be classified as recovery of waste rather than involving waste?

Baroness Maddock: My Lords, I very much welcome this report from the noble Baroness and her committee. I was especially disappointed that I was unable to take up an invitation to serve on the committee, so I have read the report with interest. I was especially interested to read about the visit to Sweden. I lived in Stockholm for three years more than 30 years ago. That was where I got my first interest in this area, when I lived for three years in a properly insulated property. I came home to Britain and put cavity wall insulation in my house. I always had an ambition to build a Swedish kit house on a piece of land somewhere and so live in a properly insulated building. As other noble Lords have said, we have still not reached that level in our building standards—and I am going back 30 years. That is a great disappointment to me.
	As the noble Lord, Lord Lewis of Newham, said, the report is wide-ranging and I intend to speak only to one or two of the recommendations, which I strongly support, and shall try to explain my experience in those areas. I especially support the recommendation to try to get better co-ordination across government departments. The fact that Defra and the DTI have different responsibilities is mentioned, but, although it is mentioned elsewhere in the report, the Office of the Deputy Prime Minister is not mentioned there. I know that the rest of the report explains that.
	I was also interested in recommendation 12.14 about merging the Carbon Trust and the Energy Saving Trust. I say that because I have worked with the Energy Saving Trust for a number of years. Indeed, at one time, I recommended that those two bodies should combine. In fact, they do slightly different things—the Carbon Trust concentrates on business and industry and the Energy Saving Trust concentrates on the domestic sector—but we are very fond of setting up lots of different bodies to tackle things and, sometimes, we go a little too far. So I have a great deal of sympathy with that recommendation.
	The other recommendation that I strongly support concerns the role of local authorities. I say that as someone who, when I was in another place, had the opportunity to take a Private Member's Bill through the House of Commons and, later, through this House, which became the Home Energy Conservation Act 1995. That Act set up local energy conservation authorities, based on housing authorities in this country, to enable them to draw out facts and figures about the state of the efficiency of homes in their areas and to draw up measures and plans to try to do something about it. The whole point of this was to be a starting point for the Government so that they had facts and figures to enable them to direct their money and their policies at solving the problems of energy efficiency in our homes. It is of great sadness to me that they have failed to use that opportunity. Indeed, over the years, they have not pushed local authorities to report on these matters, and the whole thing has become rather downgraded. I know from the work I have done over the years that local authorities are a good starting point.
	The first thing the Energy Saving Trust did was to set up a grant system, with money from the Government, called HECA—home energy conservation action. Grants were given to local authorities for projects in their areas, and it was my privilege over the years to chair the committee that distributed money in this way. The projects were wide ranging. There were all sorts of different schemes—there were local authority houses, private-sector houses and private-sector rented houses. Something interesting that came out of one of the studies was that people trusted the brand of a local authority. They would be a bit suspicious if any other flyer came through the door, but they trusted the flyer if it had the logo of the local authority on it. Therefore, if we are trying to persuade people to do things in their homes, we need to use the local authorities because we know that that helps. It has also been an enormous job creator locally. The HECA programme became the innovation programme, through which we tried to encourage people to come up with new ways of persuading people and of providing help to make homes efficient. I regret in a way that that programme has now come to an end, although the Energy Saving Trust will use all the experience that it has gathered over the years to help local authorities to replicate the best of the projects that came to our committee.
	Interestingly, the Energy Saving Trust has carried out a survey on how well prepared and equipped local authorities are and how easy it is for them to get involved to do the things they want to do in the areas of energy efficiency. It recently said:
	"Stretched finances, limited resources and a lack of support from councillors are some of the key barriers preventing the UK's local authorities from becoming more sustainable".
	It conducted a research project—a poll of 300 local authorities—which confirmed that,
	"there is widespread awareness of sustainable policies and an appetite to tackle climate change, but it is clear that local authorities need more support to translate willingness into action".
	I hope that that message will go home to the Government and that they will look seriously at the role of local authorities, particularly in the energy review.
	This leads me to building regulations, an area that noble Lords have already touched on, so perhaps I do not need to say quite so much about it. I know from the various groups that I have worked with over years, such as the Association for the Conservation of Energy and the National Home Information Council, that despite the regulations, Part L and what we have tried to do—my noble friend Lady Sharp of Guildford has also mentioned this—we know from various investigations that people are blatantly flouting the regulations and the rules. That happens in other areas of planning, I have to say, and we do not have a proper system for dealing with this. Quite frankly, we will have to deal with that problem if we really want to solve some of the other problems. I therefore very strongly support what has been said in this debate, and I hope that the Minister will be able to satisfy us a little when he comes to respond.
	On community heating, I declare an interest as a non-executive director of a heating company that provides district heating in Southampton from a combined heat and power plant which is supplemented by warmth from a geothermal borehole. It provides energy to the whole list that the noble Lord, Lord Lewis of Newham, mentioned in respect of Sheffield. It is the same in Southampton. We are also very proud that we managed to get a Barratt Homes flats scheme on to the district heating scheme. So there is private and public sector heating on that scheme.
	However, the economics and the barriers put in place by the Government have not been helpful. In my time here, I am afraid that I have lobbied Ministers furiously over the disincentives to combined heat and power schemes. As the noble Lord, Lord Lewis, said, the trouble is that memories—including those of civil servants—go back to the very bad schemes that we had in England. I think that there was no insulation on distribution pipes. Therefore, everyone thinks that they are not very efficient. As the committee saw, in Scandinavia, that has been going on for years and it is done efficiently.
	In respect of my other love, I have to declare another interest—I am president of the Micropower Council—and my interest in microgeneration. Micro combined heat and power and other microgeneration are also very important. The Association for the Conservation of Energy has said in its response to the energy review how important this is. My noble friend Lady Sharp made a point about changing people's attitudes. Those of us who support microgeneration strongly believe that it can act as a catalyst for cultural change among consumers who put microgeneration products—for example, wind, boilers, photovoltaics or solar panels—in their homes. They suddenly become aware of a lot of other aspects of how they can save carbon and the energy that they are using, which is very important.
	I am most sad that the Government, who have, in many ways, done a lot of good in the small things that they have done, miss opportunities all the time. I have explained how they missed the opportunity to use the Home Energy Conservation Act. Other people have said similar things. I believe that the Government need better co-ordination and a better use of the existing mechanisms. They need to use local government more. There is a network which is ready to help to deliver many of the things that we all want to see. It is a network that can collect data and inform the policies of the Government to improve energy efficiency. I hope that in any future energy review, and in taking into account this very good report, the Government will take these things into consideration.

Lord Redesdale: My Lords, I thank the noble Baroness, Lady Perry of Southwark, for initiating this excellent debate. I also thank our clerk for preparing a report that is actually a readable tome. You can sit down and digest it. I have read many reports on this subject and it is clear that many people are deft at managing to avoid that.
	I, too, am one of those who think it is unfortunate that transport was not added to this report, although I understand that it would then have been about three times as long. However, this morning while bicycling my son to school—obviously I take the moral high ground in this debate—I counted the number of gee whiz electric cars on the road. It is a great sight to see because they reduce emissions. However, the problem is that you cannot consider them without an integrated policy. Electric cars draw their energy from the grid. That is a problem and is why they are frowned on in Germany. If brown coal has to be burnt in Germany to produce electricity to power such cars, the resulting CO2 emissions are seen as almost worse than petrol. That shows how difficult it is to favour one source of power over another. The report clearly states that in dealing with the first issue, which is of measurement.
	As we have just heard, the metering of electricity is almost a dark art. What you are charged may have no relevance whatever to what actually goes through your local system. Therefore when we talk of kilowatt hours and other measurements, perhaps we should move towards what I believe will become accepted over the next few years: energy efficiency based on grams of COemitted to produce each kilowatt of power from source through to use. This is important, of course, because most people forget that 60 per cent of initial energy input is lost in generation in the grid before it reaches the home, and then an estimated 13 per cent is further lost through wastage of energy.
	This issue was raised in the debate last Thursday, when many noble Lords failed to mention energy efficiency at all—I was the only one to raise the matter—because at the moment, of course, the energy debate is based around the provision of nuclear. This is worrying because it gives the impression that, through the generation of nuclear energy, we will produce enough energy not to have to worry about energy efficiency, which of course is not the case.
	Being on the board of Carbon Neutral North East, I have a great deal of interest in how far up the political agenda the issue of climate change is growing and the amount of recent understanding about the link between our profligate use of energy and climate change. Of course, for my generation, unregulated use of electricity is seen almost as a human right. Last Easter, I had some friends with me at home in Northumberland when there was a power cut. There was almost a note of panic in people's voices: "What are we going to do without electricity; without the lights being switched on?". That is an interesting concept for those of us who have lived in other countries where there is no power grid and you either have to turn on a generator or do without electricity altogether.
	There seems to be a lack of understanding that people could use less electricity. A classic example of this is in the area of lighting. I have tried very hard to get people to change to low-energy light bulbs. The classic answer is, "Oh, I do not like the light". Well, Philips make a fabulous new light bulb; it is soft glow, gives a very good light, lasts for six years—so you do not have to change your light bulb every year—and you can buy them in John Lewis for £3.95. Most people will say that that is an outrageous plug, but it is important that people realise they are cheap and easy. These light bulbs actually look like normal light bulbs, and therefore people walking into a room will not feel that there is something strange in there.
	This is an important point because research carried out by Carbon Neutral North East has found that while people will buy energy-saving light bulbs, they will then stick them under the sink—or wherever they keep spare light bulbs—in case of emergency and feel that they are contributing to energy saving by doing so. It is a question of educating people to use these things.
	I recently renovated my kitchen—well, I say that; my wife forced me into buying a new kitchen. If anyone has been in that position, they know it is a very expensive undertaking. The kitchen was designed and the kitchen designer then discussed the light fittings and how many there should be. At that point I stepped in and said, "No, I am afraid that is not what I am going to do". I took his plans and worked out that the lights he was suggesting for a small kitchen would have used 1.5 kilowatts in energy consumption. I immediately ripped out the three-way spotlights, each of 100 watts, that were in the kitchen and replaced them with two 20-watt energy-efficient light bulbs. I believe that the difference in the light given off is marginal.
	It seems almost as though we are driven by a consumer culture; that we must have transformers driving vast numbers of halogen bulbs and lighting up the underside of every single kitchen area. I have been to my friends' house, where they had had a kitchen put in which even had lights in the floor. It seems to me that that could be a health hazard if young children were to stand on the lights after they had been on all day.
	Another issue is the standby facility. Noble Lords have mentioned it, but we should put it into context. It has been calculated that 10 per cent of our generating capacity is used in standby. I hope that the Government will be pressing manufacturers to sign up to the 1 watt standby convention, whereby all standby facilities should use only 1 watt. The fire authorities have said that standby is a fire issue; fires have been caused and lives lost through people leaving on the video recorder stacked on top of the DVD, stacked on top of the television, all on standby, over the summer when they are away.
	Energy saving is a real issue. The report highlights how white goods should be labelled. This is particularly important because there is the horrendous move to digital TV, where everybody has gone out and bought a digital TV box—one more item to add to the other systems in the house. I admit that I have bought a digital TV box because of CBeebies. If you have children, you will understand. But I was amazed when I then looked at the box to find out how much power it was using, and I did some research into it. Some of these boxes use almost as much power on standby as they do in operation. They are generating heat the whole time and there is no way of finding out how much power they are using. It should be clearly stated; that would be a market incentive when manufacturers consider which product to bring out. The guidelines should be much clearer and much tougher.
	The report discusses fridges and freezers, moving from the A rating to the A++ rating or the AAA rating. I find it interesting that imported large stand-up fridge-freezers, with a fridge on one side and a freezer on the other, should get an A rating. When you open the door of a stand-up freezer, cold air will automatically fall out. I believe that only box freezers should have an A rating. It may seem like a small point, but every time you open the freezer, there is a real energy requirement to replace that cold air.
	I have two quick questions for the Minister. I do not think he will be able to answer them this evening but I hope he can write to me. I confess that I thought the noble Lord, Lord Sainsbury of Turville, would answer the debate; this shows that there might be a degree of misunderstanding about certain issues. I believe that there should be a ministry that encompasses all energy issues; the divide between Defra, the DTI and the ODPM is causing confusion and problems, and one of my questions relates specifically to the divide.
	I recently introduced a Private Member's Bill on dynamic demand devices. These are not sex toys as somebody once guessed, but chips which go in your fridge and listen to the background hum of the grid. The grid is stressed at times of peak use—at half-time of the World Cup final, say, when everybody puts their kettle on—which leads to a spike. I did not realise that it is not just a question of putting the kettle on but of flushing the loo at the same time: the mechanical energy of shifting billions of gallons of water around the country causes a larger proportion of the peak use than putting on kettles. At such a stress point on the grid, the chip would switch off your fridge, freezer or air-conditioning unit. Using such a device on millions of fridges for only that short time would avoid using one of the power stations that is on standby to meet the demand.
	In the Climate Change Bill which is going through another place and which should come to us shortly, the DTI has taken responsibility for the background research to prove that this is a workable proposition. Industry already says that it will spend money on working out how to insert the chips into fridges and freezers. However, at meetings between the DTI and those pushing for dynamic demand, no indication was given of how much money would be made available to pay for this background research. It said that we could apply for funding in July and that it might come through in December. This technology could save between 0.6 and 1.2 million tonnes of carbon a year. If that is the case, should there not be some urgency in finding the money in the DTI to meet that funding? I hope that the Minister can give me some indication of the position.
	My second question relates to a micro-generating technology in which I am interested. Solar thermal panels, which take heat from the roof and dump it in your hot water tank, are a growing technology, and they will become increasingly important. I was contacted by a company called Solar Twin, which has introduced a new design technology for making this appliance work. However, it has been left out of Part L of the ODPM's building regulations. Unless a technology is covered by those regulations, it is illegal for a builder to fit it. Therefore, new technologies are being denied access to the marketplace. I hope that the Minister will consult with the ODPM and come up with a reason why this new technology has not been covered in the regulations.
	I have taken far too much time at this time of the evening. We are probably the only Members in the House on a Thursday evening, so I will end on the important topic of education. Energy efficiency is about education and about making people understand how important it is. I understand that Defra's climate change programme is supplying money for projects around the country to increase education. I was very interested to read in the report about how energy is wasted on the parliamentary estate. At about the same time, I visited Black Rod to talk about energy efficiency in the building. He said that one can break down energy efficiency into three areas in a building such as this. The first area is the fabric of the building, to which as much is being done as is possible in a Grade I listed building. The second is the systems that are in place, such as fitting energy-saving light bulbs around the building. That seems to have taken off in the past year or two. The third element, which was left out of the report, is something over which Black Rod has no control; that is, how Peers use electricity and how they use resources. We are all guilty. Walking around the building, I have been amazed by how almost every office one goes into has the lights on. Most offices have left-on computers. Screensavers do not save electricity, but people leave computers on the whole time.
	We on these Benches have discussed this matter and will put around a paper to all our Members about switching the lights off. I hope that we can then talk to other party groups about implementing it among all Peers. An individual effort will have to be undertaken by each Peer. However, it should be stated on the boxes even of energy-saving light bulbs that the most efficient light bulb is one that, when it is not being used, is turned off.

Lord Bach: My Lords, I start by thanking all noble Lords who have spoken in today's debate, in particular the noble Baroness, Lady Perry of Southwark, and all the members of her sub-committee and the members of the wider committee who have spoken today. I also thank them for the comprehensive and detailed report that they produced last year.
	We set energy efficiency at the heart of our energy White Paper in 2003, and it makes a key contribution to reducing carbon emissions as well as our other energy goals of improving competitiveness, ensuring security of energy supplies, and not least helping to alleviate fuel poverty. As has been quoted, the Prime Minister has said on more than one occasion that the Government believe that climate change is the greatest long-term challenge facing the world today. Therefore, we welcome very much the House's attention to this most important issue, and we thank the noble Baroness for bringing her report to the House.
	We have made considerable progress since the committee published its report, in particular through this year's Budget and in the UK climate change programme. I will not attempt in the time available to summarise the Government's comprehensive response to what was a very substantial report. However, following the advice given by the noble Lord, Lord Dixon-Smith, I will, if I may, briefly outline the key developments, some of which have taken place since the report was published, that address some of the significant issues raised by the committee. I shall therefore not cover all the questions that have been asked. I will try to write to noble Lords with answers to those questions, including the two asked by the noble Lord, Lord Redesdale. Before I move on, however, I should tell him that I am one of those who does his best to remember to turn off his light when I leave my room in this House.
	The energy efficiency commitment is one of the two main policies designed to promote energy efficiency in households. We will seek to achieve substantially higher carbon savings from the energy efficiency commitment in its next phase from 2008 to 2011, representing a 50 per cent to 100 per cent increase on the current scheme. We have also made amendments to a Private Member's Bill in the other place which, if successful, could set the energy efficiency commitment targets more explicitly in carbon terms and allow the inclusion of a wider mix of measures including micro-generation and behavioural measures.
	The committee rightly highlighted the importance of building standards, a matter which has been highlighted by practically every noble Lord who has spoken today. This month, new provisions in the building regulations came into force which, combined with the previous revision in 2002, give a 40 per cent improvement in the energy performance of new buildings. To secure better compliance with the regulations, the Government have engaged in an unprecedented dissemination programme aimed at ensuring that all stakeholders can acquaint themselves with the new requirements of these regulations, and we have introduced a comprehensive training programme for building control surveyors and a requirement for air-pressure testing. We are also conducting a comprehensive review of measures to tackle existing buildings—which are, as the noble Lord, Lord Dixon-Smith, pointed out, the majority by a long way—which will make recommendations to Ministers this summer.
	The committee highlighted the role of the Code for Sustainable Homes, which will set out voluntary standards going beyond the minimum set out in the building regulations themselves and signal the future direction of regulations. We have reissued a strengthened draft code in which even the lowest energy standard goes beyond regulations. All publicly funded housing will have to comply with code level 3, demonstrating strong public leadership. To encourage onsite energy generation, new homes that use micro-renewable technology such as wind turbines will gain extra code points.
	The noble Lord, Lord Lewis of Newnham, was one of those who said that building standards do not compare with the best European standards. Perhaps I may answer by saying that anyone who looks at this matter objectively would know that building standards are not low in the United Kingdom. Our current standards are comparable with those of other European countries with similar climates. We have signaled our intention to review the regulations every five years. Regarding his other question, on the number of installations, I hope he will forgive me if I write to him, as I do not have the figures to hand.
	The committee rightly raised the importance of consumer behaviour. The joint Defra/Treasury energy efficiency innovation review which was published last December, after this report was published, recognised that lack of consumer awareness represents a major barrier to the uptake of energy efficiency measures, a point that was echoed in the House tonight. In response, not only are we working to enhance our climate change communications initiative to change public attitudes to climate change at every level; we have also announced a major new initiative to strengthen consumer demand for energy efficiency. Through this, we will work closely with energy suppliers and local authorities—I hope that the noble Baroness, Lady Maddock, will at least be pleased with that—with funding of £20 million over the next two years. We will be announcing further details shortly.
	It has been demonstrated in other countries that the provision to consumers of detailed information on their energy use helps to deliver energy savings, and we have committed to deliver significant savings in that way by 2010. Rather against expectations, the UK secured a first reading deal during our EU presidency on the energy end-use and energy services directive. This includes robust provisions on smart metering, which we are now preparing to implement. This year's Budget also included £5 million to pilot feedback devices, such as smart meters and other related technologies. I hope that the noble Lord, Lord Broers, who mentioned smart metering in particular, will be pleased when I tell the House that only yesterday the Environment Minister, my colleague the honourable Elliot Morley, launched the first interactive smart metering trial in the residential sector. This trial, managed jointly by EDF Energy and National Energy Action, will see 3,000 electricity and smart gas meters installed in homes over the next two years. I hope that that brief announcement counters some of the views that have been fairly prevalent in the House tonight about the Government's response.
	With energy prices rising, it is more important than ever to help vulnerable consumers to heat their homes. We have increased funding for the Warm Front scheme in England, which delivers energy efficiency measures to low-income households, by a further £250 million. That brings funding to a level in excess of £800 million between 2005 and 2008.
	The committee rightly highlighted the potential for heat generation from renewable sources. In the climate change programme, we announced a new support scheme for biomass heat in the industrial, commercial and community sectors. The scheme will run for five years and will be worth at least £10 million to £15 million in England over the next two years. The Energy Minister, Mr Malcolm Wicks, who has been referred to in the debate, and I were delighted to come together. I was asked about the relationship between Mr Wicks and Defra. From this morning's meeting, I can say only that the relationship is extremely good. We were delighted to announce earlier today our action plan for renewable energy in biomass, which forms our response to the Gill task force report, published last October.
	I am sure that noble Lords will have read that report carefully and will have taken note of the suggestions in it concerning the relationship between biomass and heat. The report, which we have largely accepted, provides a clear path forward and includes a capital grant scheme for biomass boilers, the establishment of a new biomass centre to give expert information and advice, agreement in principle to further grant support for energy crops, and a commitment to use biomass heating, wherever appropriate, in government buildings. I am sure that members of the sub-committee who produced the report will be pleased about that.
	The public sector has a key role, both directly through its considerable powers of procurement and, more broadly, through its leadership. We have set up a new revolving loan fund of £20 million to finance investment in public sector energy efficiency, and we will also introduce new strategic targets for the central government estate this summer. We want to see a significant increase in the level of engagement by local government in all climate change issues. This year's climate change programme sets out a range of new measures to increase the contribution of local and regional government to our climate change goals. These include funding of £4 million over three years to roll out a new package of measures to help thousands of community groups across England to take action on sustainable development, including climate change.
	It is clear that we must tackle energy use in every part of the economy if we are to deliver the step change in energy efficiency to which we are committed and which the report clearly suggested we should adopt. For example, the Secretary of State and I yesterday launched a strategy to tackle the impact of the food industry on precious resources such as energy, and its contribution to climate change. The food industry sustainability strategy—or FISS—addresses all sectors of the food industry, beyond the farmgate to the consumer's plate. It provides a framework for improving the sustainability of the food and drink industry through widespread adoption of best practice.
	In the past, our climate change programme has focused on energy-intensive users in the business sector and households. Noble Lords have also highlighted the importance of addressing emissions from smaller businesses. We are providing additional resources of £15 million for the Carbon Trust to expand its loan scheme whereby small and medium-sized enterprises can receive interest free loans of between £5,000 and £100,000 for energy efficiency investments.
	The committee and the noble Baroness, Lady Perry, in her opening speech, raised the issue of the so-called "rebound effect", whereby cost savings from energy efficiency lead to increased spending elsewhere, offsetting some or all of the original energy savings. Following the publication of the report and its recommendations, Defra has commissioned two independent expert studies which are about to be published. They confirm that the total rebound is likely to be of the order of 25 to 40 per cent. While that is a significant factor, it by no means negates the value of energy efficiency improvements, as some have suggested. As an ancillary finding, the models have revealed a positive impact from improved energy efficiency on productivity in the UK economy and on employment. Copies of both studies will be placed in the Library, and they will of course go on the Defra website. I shall ensure that all members of the committee receive copies as soon as they are published.
	The committee stressed the importance of energy research and highlighted the comparatively low level of UK funding. In last month's Budget, the Chancellor announced a new national institute for energy technologies. This represents an opportunity to tackle key energy research challenges, to accelerate progress towards a low-carbon economy and to help ensure reliable long-term energy supply. The combined public and private investment envisaged for the institute is around £1 billion over its 10-year lifetime.
	I have not been able to respond in detail to all of the many points raised, but I will do my best with one or two. The question of how government should be structured to deal with the issue is obviously important and was raised in the report and on the Front Benches. Tackling climate change obviously means influencing every sector of the economy: housing, health, education and transport as well as, of course, the energy sector. The argument is over whether it is realistic to expect all of these sectors to be the responsibility of any one department or Minister. The House will know that in May last year the Prime Minister set up the Ministerial Committee on Energy and the Environment, which he chairs, reflecting the importance we attach to meeting our domestic and international targets and to securing a high level of commitment across government to effective climate change mitigation policies.
	Frankly, there will always be departmental divisions, whichever way responsibilities on climate change policies are split. It is clear that the Secretary of State for the Environment leads the UK's work on reducing greenhouse gas emissions and its adaptation to the effects of climate change. However, it is important to secure a high level of commitment across government, as the important Sustainable Energy Policy Network, made up of senior Ministers, enables us to do, rather than trying to bring more and more areas of policy within the direct control of any one Minister. The question I pose to the Front Benches is this: they can criticise the present structure as much as they like, but what can I look forward to hearing proposed—perhaps in the case of the Conservative Party in about 18 months' or two years' time—as an alternative to deal with this issue?